Sterling bears were installed with inspiration during trading on Monday with the pound aggressively declining across the board following cautious comments from Bank of England (BoE) Deputy Governor Nemat Shafik regarding a UK interest rate rise in 2016. Her cautious tone and disinclination towards a UK rate hike until wage growth has recovered in the UK economy dealt a sharp blow to investor sentiment, and has consequently reinforced the growing concerns around the BoE’s clear reluctance to begin raising UK interest rates. Investor attraction towards the pound continues to diminish and with expectations that the Bank of England may push back raising rates beyond next year and with early 2017 still not being highlighted as a probable timeframe at this point, the Sterling remains vulnerable and open to further losses in the future.
It has to be said that the reason behind the GBPUSD experiencing a sharp appreciation during trading late last week was the result of USD weakness, and this had very little to do with improved sentiment towards the Sterling. It is clear that the Sterling continues to fall victim to the BoE’s refusal to commit to raising UK rates, while other signs of slowing economic growth and stagnant inflation are also mitigating any pressure on the BoE to act.
Speaking of inflation, later today investors will be awaiting the latest CPI reading for the UK economy and if this follows the same static trajectory of the previous inflation releases, the Sterling may be left vulnerable as the BoE have been provided another compelling reason to push back raising UK rates until most likely early 2017.
Despite the sharp appreciation the GBPUSD experienced last week, the pair is still bearish and open to further losses in my opinion. The lingering concerns over a potential slowdown in economic momentum for the UK economy combined with the strong expectations that the Fed may raise US interest rates on Wednesday holds the potential to encourage sellers to send the GBPUSD back down towards its recent lows at 1.49.
From a technical standpoint, despite prices trading above the daily 20 SMA the MACD has still crossed to the downside. On numerous occasions most gains have been capped below both the 50 and 200 SMA. A solid breakdown below the intraday support of 1.5125 may encourage sellers to drag the GBPUSD towards the recent lows of 1.49.
FTSE100 under pressure
The reoccurring concerns over the resumption of selling in the commodity markets, with WTI Oil attracting widespread headlines has heavily bruised mining stocks and consequently sent the FTSE100 to fresh 3-month lows at 5860.
This index remains under extreme pressure from the continual decline in oil prices and is currently looking heavily bearish as traders part away from risky assets amid the looming Federal Reserve interest rate decision on Wednesday. Prices are trading below the daily 20 SMA and the MACD has also crossed to the downside. Previous support at 6050 may become a dynamic resistance, which could encourage sellers to continue sending the FTSE100 towards as low as 5800.
EURGBP
The EURGBP is technically bullish on the daily timeframe. Prices are trading above the daily 20 SMA and the MACD has also crossed to the upside. A breakout above 0.7280 should encourage buyers to send prices towards 0.7330.
NZDCAD
This pair is heavily bullish on the daily timeframe as there have been consistent higher highs and higher lows. Prices are trading above the daily 20 SMA and the MACD has also crossed to the upside. The bullish momentum may take prices to the next relevant resistance based at 0.9400.
GBPSEK The GBPSEK remains technically bearish on the daily timeframe as long as prices can keep below the 12.950 resistance. If bears can maintain this downwards momentum, prices may decline towards 12.680.Technical indicators such as the 20 SMA and MACD which also point to the downside fortify this bearish view.
Disclaimer: The content in this article comprises personal opinions and ideas and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
Risk Warning: There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.