Over the last 24 hours the GBP/USD has fallen down further but found solid support right on 1.5160. It is presently trying to rally a little and try to move back towards the 1.52 level. This has resulted in seeing the pound at levels not seen since early April. The pound has now experienced a strong fall over the last couple of weeks. Prior to the last couple of weeks, the pound enjoyed a strong couple of weeks and move to new highs above 1.56. It experienced all sorts of bother at 1.56 as it made several pushes to this significant level however it was turned away with excessive supply. For about a week it ran into a wall of resistance right around the 1.56 level which is very evident in the left hand half of the 4 hourly chart below. This showed how much buying pressure there was on the 1.56 level but equally how well that level provided resistance to any movement higher. The pound had enjoyed a very solid couple of weeks moving from the support level at 1.52 to reach new highs at 1.56, a new ten week high.
Back around mid April the pound experienced solid support at 1.52 for about a week which greatly assisted the recent surge higher, and now this level is being called upon again to offer some support and a soft landing. Towards the end of last week, we saw some evidence of that as the decline had been slowed down halted, although it has fallen slightly lower since. The last couple of weeks has seen the pound fall strongly and return almost all of its gains from the few weeks before that. About a month ago the 1.54 level provided a little piece of resistance and this level has since been broken as it offered limited support. Now that the pound has drifted back down below 1.54, it may provide some resistance again. During its push to 1.56, the pound was able to find some support at 1.55, although this level was also broken a couple of weeks ago.
Over the last month or so, the GBP/USD has been experiencing a variety of different levels which have played a role on the price action. Towards the end of March the GBP/USD was trading within a range roughly between 1.51 and 1.5250 and now on a couple of occasions it has been able to move outside that range and push higher. A few weeks ago, the 1.5350 level was one of significance as it offered resistance before the GBP/USD was able to move higher through to 1.56. In early March the pound moved to new lows around 1.4830 from a starting point near 1.64 at the beginning of the year. With the surge higher over the last couple of months, the GBP/USD had completely turned around its fortunes from earlier in the year, however it is starting to ease off and return most of the good work.
In Europe, we’ve seen a lot of volatility from the euro recently, and one of the reasons has been statements from the ECB regarding negative deposit rates. Essentially, this means that depositors would be charged a fee for cash deposits held in European banks. ECB head Mario Draghi broached the idea earlier this month, and the euro dropped almost immediately. The reason? Negative deposit rates would lead to the flow of funds out of the Eurozone, as deposit holders seek better returns on their money. Earlier in the week, ECB member Ignazio Visco said that the ECB was open to the idea of negative deposits. Proponents of the idea argue that it would increase lending to businesses and help boost economic activity in the sluggish Eurozone. The ECB would be the first major central bank to adopt negative deposit rates, and if the ECB does take steps to adopt this measure, we can expect the euro to react.
GBP/USD May 20 at 02:50 GMT 1.5192 H: 1.5202 L: 1.5166
During the early hours of the Asian trading session on Monday, the GBP/USD is rallying a little and moving back towards the 1.52 level, after having recently found solid support right on 1.5160. Throughout the first part of this year, the pound fell very strongly from the key resistance level at 1.63 level down to levels not seen in two and a half years and has done well the last month to rally well and move back up above 1.56. Current range: Right around 1.5190.
Further levels in both directions:
• Below: 1.5160 and 1.5100.
• Above: 1.5300 and 1.5600.
(Shows the ratio of long vs. short positions held for the GBP/USD among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)
The GBP/USD long positions ratio has moved back up above 50% after the GBP/USD has fallen down to the three week low near 1.52. Trader sentiment remains in favour of long positions.
Economic Releases
- 05:00 JP Leading indicator (Final) (Mar)