GBP/USD – Testing support ahead of Fed and BoE

Can it break decrease?

The pound has been trending decrease towards the greenback because the Russian invasion of Ukraine as merchants have sought the security of the dollar in occasions of stress.

However what’s fascinating in latest days is that whereas market sentiment has improved, the pair has continued to slip. And with it now approaching 1.30 – a significant historic psychological barrier – forward of each the Fed and BoE conferences this week, what’s subsequent for the pair?

For a little bit of context, each central banks are totally anticipated to lift rates of interest this week and a number of occasions extra this yr. Whereas the Fed is simply simply embarking on its tightening cycle, a 25 foundation level improve this week could be the third consecutive hike for the BoE, with the earlier two coming in December (15 foundation factors) and February (25 foundation factors).

The perceived hawkishness of each may very well be key in figuring out the trail of journey for the pair over the course of the week, with the market’s pricing in no less than 5 extra hikes from the Fed and 4 extra from the BoE this yr (on prime of this week). That and, in fact, developments in Ukraine.

It’s fascinating that, whereas 1.30 seems to be coming beneath some strain on the time of writing, the momentum indicators on the 4-hour chart don’t actually supply a lot confidence. The divergence we’re seeing suggests a breakout might be difficult and except we see a shift within the MACD and stochastic, even perhaps weak to a false breakout if it does transfer under.

The longer-term pattern is clearly towards it although and if we do see a corrective transfer, the important thing ranges that stand out are clearly 1.31 and 1.32 being notable latest areas of assist and resistance on the best way down.

This text is for common data functions solely. It isn’t funding recommendation or an answer to purchase or promote securities. Opinions are the authors; not essentially that of OANDA Company or any of its associates, subsidiaries, officers or administrators. Leveraged buying and selling is excessive danger and never appropriate for all. You might lose all your deposited funds.

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