Monday, November 19, 2018

GBP/USD - 19 November 2018


Fundamental Highlights

The British Pound recovers and trades above 1.2800 as the weakening US Dollar benefited all major G10 currencies. The US Dollar weakened after the newly appointed Fed Vice Chair, Richard Clarida claimed that a neutral interest rate state for the US economy would “make sense”, and that the Fed is actually getting close to such state. As defined by Clarida, a neutral state is described by interest rates at 2.5% to 3.5%. Such claim signaled to the market that we will not see more than three rate hikes next year. Furthermore, the US Dollar was under pressure after Clarida cited the slowdown in global growth as a major concern to the Fed’s rate hike plan as slow growth might spill into the US. From the Pound’s side, nothing significant occurred relating to Brexit politics and this is why the pair’s Friday move was mostly attributed to US Dollar fundamentals.

For today, investors need to keep a look out onto the performance of US Treasury yields as they will give us an idea about how the market feels about the future of rate hikes, the current major driver of the greenback. More importantly, investors need to keep a constant look out to any major announcement relating to the UK parliament’s voting on the controversial Brexit deal struck by Theresa May and the EU.

Technical Analysis

The Pound ranges around the 13-period moving average after bouncing off the 1.2807 support level. Depending on the performance of the greenback and any news related to Brexit, the pair will either push higher and break above the 50-period moving average or break back lower below the 1.2807 support exposing the 1.2729 level.

Support: 1.2806 / 1.2729
Resistance: 1.2937 / 1.3047

Chart (H4)