Sterling rallies whilst FOMC draws nearer

A sense of positivity has dispersed across the financial markets ahead of the awaited FOMC statement on Thursday, as gains were viewed across the board. China, although still the main theme, has been shifted to the side whilst market participants ponder on whether US rates will be left unchanged or hiked. Asian equities have ventured back into green territory with the Shanghai Composite Index which has been under an extended period of pressure, closing +4.89% higher. European equities have followed the same pattern with the FTSE100 posting gains of 0.81% as of writing. This positivity may ripple into the New York session later today, which may result in the American equities experiencing further gains as they also closed in the green yesterday.

The Sterling has experienced a decline against the USD and JPY at the start of the week due to the risk-off environment that was promoted by soft Chinese data over the weekend. Wednesday’s European session inspired bullish momentum within the GBP as both the average earnings index 3m/y and unemployment rate printed above expectations favouring the GBP bulls. Even though the prospects of a UK interest rate hike anytime soon remains weak, the UK data overall has been robust on a continual basis and there is still optimism that a rate hike may happen in 2016.

In the commodities arena, WTI continues to retain its stability with support at $44 and resistance at $46. Goldman Sachs’ outlook on oil trading to fall to $20 has been brushed aside for now and OPEC’s monthly outlook for August which slashed supply forecasts failed to induce any direction. The commodity continues to wait for the next relevant release or event to determine which direction the price is going to next. While the revolving theme of oversupply has weighed heavily on sentiment, the FOMC statement tomorrow may provide some clarity on this commodity which has been in a suspended state since the start of September.

GBPUSD
The GBPUSD remains technical bearish on the daily timeframe as long as prices can keep below the 1.5450 resistance. The MACD points to the downside, but prices are just marginally below the daily 20 SMA. A breakdown below the 1.5330 support may open a path to the next relevant support at 1.5160.

GBPAUD
The GBPAUD became technically bearish on the daily timeframe when prices breached the 2.1500 support. Prices are below the daily 20 SMA, but the MACD trades to the upside. A solid daily close below the 2.1500 support may promote a further decline to the next relevant support at 2.1100. A move back above the 20 daily SMA suggests bearish weakness.

NZDCHF
Sentiment remains bearish for the NZD due to the interest rate policy from the RBNZ and the downside economic pressures from the events in China. The NZDCHF is technically bearish on the daily timeframe. As long as prices can keep below the 0.6250 resistance, a decline back down to the 0.6050 support may be expected.

NZDJPY
The risk-off environment has provided the JPY with consistent strength. The NZDJPY is technically bearish on the daily timeframe. Prices are trading below the 20 SMA and the MACD points to the downside. As long as resistance at 78.80 holds, there may be a further decline to the 74.50 support.