Quick Review of FX Market
As expected, global financial markets remained calm for the majority of yesterday’s trading as a majority of traders enjoyed a day off.
The top performance came at the edge of a long trading day with the Fed’s rate decision and report. As anticipated they left rates steady. However, they did cut the IOER (interest rate on excess reserves) by 5 bps, and Jerome Powell affirmed the FOMC’s current patient approach and suggested that the subsequent move could be either up or down concerning rates.
The market was positioned for a further dovish viewpoint, and consequently, we witnessed the dollar and US treasury yields appreciate, and stock markets collapse.
GBP/USD Technical Outlook, BOE Policy In Focus
GBP/USD is stretching its gains, trading over 1.3050, at levels last observed on April 17th. There are diverse reasons for the bullish trend.
In the UK, there are concerns that the cross-party discussions will make development. Labour shadow business secretary Rebecca Long-Bailey announced that discussions were positive so far. Labour concluded it will prioritize a contract with a government and wants to see PM Theresa May offer further concessions on a customs union. The next choice is for an election, and the last one, as determined by the party’s internal committee, is a second referendum.
Secondly, the GBP/USD mounted higher on the back of weakness in the US Dollar. The greenback sank after the dovish FOMC. Anyways, today investors focus stays on the GBP/USD and other pairs in of Sterling.
What to Expect from the Bank of England?
While the central bank isn’t anticipated to change its existing monetary policy with key bank rate at 0.75%. Most of the focus will be on quarterly economic forecasts and Governor Mark Carney’s press conference. The UK central bank altered down its Q1 2019 and 2020 inflation and growth outlooks during the latest statement.
Given the latest optimistic economic figures and progress over the Brexit, odds of BOE’s Carney to grant an upbeat statement seem brighter. However, inflation is still lingering behind the 2.0% target, and the Brexit also lacks clarity.
The oversold GBP/USD is retraced back to meet 23.6% Fibo level of 1.3050, and further downside momentum seems to be there. While 100-day and 200-day simple moving average (SMA) near 1.2975 and 1.2960 acts as essential downside supports.
Key Trading Level: 1.3064
The GBP/USD prices are still holding above 20, 25 and 50 periods exponential moving averages, suggesting a bullish bias of traders.
April lows near 1.2865 shouldn’t be missed on the break of 1.2960.
On the upside, the bearish trend line is extending resistance at 1.3105 and 1.3130 which could be considered as adjacent resistances ahead of targeting 1.3200 and 1.3270 during further advances.
GBP/USD – Trade Idea
Keep a close eye 1.3060 to trade the GBP/USD, as pair can stay bullish above this pivot level. While selling is suggested below the same to target 1.3035. All the best!