GBP/USD Price Forecast – British Pound Has Noisy Day as MPC Announces Tapering

The British pound has gone back and forth during the trading session on Thursday as the Monetary Policy Committee has come and gone, suggesting that tapering is coming in the bond market. That of course is bullish for the British pound, but at the same time we have been locked in a lot of support and resistance in this general vicinity.

GBP/USD Video 07.05.21

When you look at the 50 day EMA, has offered a bit of support as of late, so that is something worth paying attention to. Furthermore, we have the double bottom underneath there that continues to support the market as well. It is not until we break down below there that I think we could start to see the first “cracks in the ice” of the uptrend but if you are a seller, you then need to worry about the 1.35 level underneath which is attracting the 200 day EMA. Underneath there, then obviously the trend is done.

To the upside, the 1.40 level continues to be like a “brick wall for the market” and breaking above there on a daily close would be a massively bullish sign. In the short term, I think we simply go back and forth in the fact that we have the jobs number coming out on Friday certainly makes quite a bit of sense. Ultimately, this is a market that is been very volatile for the session, but it seems to have been little changed. Interesting to see this reaction, but at the end of the day I think people almost immediately turn their attention on the employment situation in America.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Daily Forecast – Resistance At 1.3900 Remains A Major Obstacle On The Way Up

GBP/USD Video 06.05.21.

British Pound Is Mostly Flat Against U.S. Dollar

GBP/USD continues to test the resistance at 1.3900 while the U.S. dollar is mostly flat against a broad basket of currencies.

The U.S. Dollar Index remains near the resistance at the 20 EMA at 91.30. In case the U.S. Dollar Index manages to settle above this level, it will head towards the next resistance at the 50 EMA at 91.45 which will be bearish for GBP/USD.

Today, foreign exchange market traders will focus on the Bank of England Interest Rate Decision. The rate is projected to stay unchanged at 0.1% so traders will pay attention to the Bank’s commentary.

Traders will also have a chance to take a look at the final reading of UK Services PMI report for April. Analysts expect that Services PMI increased from 56.3 in March to 60.1 in April.

In the U.S., traders will focus on Initial Jobless Claims and Continuing Jobless Claims reports. Initial Jobless Claims report is projected to show that 540,000 Americans filed for unemployment benefits in a week. Continuing Jobless Claims are projected to decline from 3.66 million to 3.62 million.

Technical Analysis

gbp usd may 6 2021

GBP/USD continues its attempts to settle above the resistance at 1.3900. If GBP/USD manages to settle above this level, it will get to another test of the resistance at 1.3920.

A successful test of the resistance at 1.3920 will push GBP/USD towards the next resistance at 1.3950. If GBP/USD settles above this level, it will head towards the resistance at 1.3980. A move above this level will open the way to the test of the resistance at 1.4000.

On the support side, the nearest support level for GBP/USD is located at the 20 EMA at 1.3875. If GBP/USD manages to settle below the support at the 20 EMA, it will move towards the 50 EMA at 1.3850. A successful test of this level will push GBP/USD towards the support at 1.3800. No significant levels were formed between 1.3800 and the 50 EMA so this move may be fast.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data and Monetary Policy in Focus, with the Bank of England in the Spotlight

Earlier in the Day:

It was a relatively quiet start to the day on the economic calendar this morning. The Kiwi Dollar was in action early this morning.

For the Kiwi Dollar

Building consents were in focus this morning.

In March, building consents jumped by 17.9% following a revised 19.3% slide in February.

According to NZ Stats,

  • A record 41,028 new homes had been consented in the year ended March 2021.
  • In the month of March, a monthly record 4,128 new homes were consented.

The Kiwi Dollar moved from $0.72178 to $0.72169 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.01% to $0.7217.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.11% to ¥109.33 against the U.S Dollar, while the Aussie Dollar was up by 0.01% to $0.7748.

The Day Ahead:

For the EUR

It’s a quieter day ahead on the economic data front. German factory orders and Eurozone retail sales figures will be in focus later today.

While we will expect some EUR sensitivity to the retail sales figures, German factory orders will likely be the key driver.

At the time of writing, the EUR was down by 0.02% to $1.2003.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. Finalized services and composite PMI figures are due out for the UK.

Expect any revisions to the services PMI to influence ahead of the Bank of England monetary policy decision later in the day.

With the markets expecting the BoE to stand pat, any dissent in the ranks and hawkish chatter would give the Pound a boost.

At the time of writing, the Pound was flat at $1.3905.

Across the Pond

It’s a relatively quiet day ahead on the economic calendar. Unit labor costs and nonfarm productivity figures for the 1st quarter are in focus later today along with jobless claims figures.

Expect the weekly jobless claims figures to be the key driver. The markets will be looking for a fall to sub-500k levels ahead of tomorrow’s NFP numbers.

At the time of writing, the Dollar Spot Index was up by 0.01% to 91.316.

For the Loonie

It’s another quiet day ahead on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction. The lack of stats will leave the Loonie in the hands of market risk sentiment on the day.

At the time of writing, the Loonie was down by 0.01% to C$1.2268 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

May 6th 2021: DXY Enters Quiet Phase Above 91.00 as Traders Await US Job’s Data on Friday

Charts: Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following a three-month retracement, demand at 1.1857-1.1352 made an entrance and inspired a bullish revival in April, up 2.4 percent at the close.

April upside throws light on the possibility of fresh 2021 peaks in the months ahead, followed by a test of ascending resistance (prior support [1.1641]).

Based on trend studies, the primary uptrend has been underway since price broke the 1.1714 high (Aug 2015) in July 2017. Additionally, price also breached trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

Technical structure unchanged from previous analysis.

Thanks to Wednesday’s bearish presence heading into the European close, the 200-day simple moving average is now within touching distance, currently circling 1.1940 levels. This—as aired in recent technical writing—represents a dynamic value that could deliver support if tested. To the upside, however, Quasimodo resistance stands at 1.2169.

In terms of trend, despite the 2021 retracement, the currency pair has been entrenched within an uptrend since early 2020, movement that many traders will likely refer to as a primary trend on this timeframe.

The RSI recently placed support at 51.36 in the mix, following a retreat south of the overbought setting in late April.

H4 timeframe:

Wednesday’s decline, as evident from the H4 scale, had EUR/USD shake hands with support at 1.1990 and a Fibonacci cluster between 1.1971 and 1.1986 (a defined area on a price chart where Fib retracement levels converge). For the moment, buyers have welcomed the area, yet to add bullish conviction traders are likely watching for either a break of yesterday’s high at 1.2026 or a bullish candlestick configuration to form.

As highlighted in Wednesday’s technical briefing, overthrowing the aforesaid Fib cluster unearths additional support at 1.1937 (aligns closely with the 200-day simple moving average on the daily scale), while a decisive rotation to the upside shines light on resistance at 1.2108.

H1 timeframe:

For those who read Wednesday’s technical briefing, you may recall the following (italics):

From the H4 timeframe, however, focus is on support at 1.1971/1.1990 (support/Fibonacci cluster). This also unlocks a possible whipsaw through 1.20 on the H1 to test the noted H4 support as well as H1 support at 1.1989. A H1 close back above 1.20—following a 1.1971/1.1990 test—is likely to be interpreted as a bullish theme, targeting at least 1.2035 (H1) resistance.

As evident from the H1 chart, 1.20 did indeed embrace a mild whipsaw on Wednesday, allowing support to 1.1989 to enter the fray. However, upside attempts have been somewhat lacklustre thus far, unable to pencil in a fresh higher high and reach H1 resistance at 1.2035.

Action out of the RSI indicator reveals the value has struggled to overturn 47.50 resistance, parked just south of the 50.00 centreline. However, readers may also be aware that 47.50 rejections have become softer in recent trade, echoing a possible break in the not-to-distant future.

Observed levels:

Recovery from the key figure 1.20 on the H1 could still grace the chart, reinforced by the H4 crossing swords with support at 1.1971/1.1990 (support/Fibonacci cluster) and the monthly scale showing buyers rebounding from demand at 1.1857-1.1352.

Another dip-buying scenario to be mindful of is a move to H4 support at 1.1937, a level sharing chart space with the 200-day simple moving average from 1.1940 (daily timeframe).

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since the beginning of 2021, buyers and sellers have been battling for position south of trendline resistance (prior support – 0.4776 high) and supply from 0.8303-0.8082. Should a bearish scenario unfold, demand at 0.7029-0.6664 (prior supply) is featured to the downside.

Trend studies (despite the trendline resistance [1.0582] breach in July 2020) show the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high [2018]).

Daily timeframe:

Technical structure unchanged from previous analysis.

From mid-April, AUD/USD has been consolidating around resistance from 0.7817.

Territory to the downside shines the technical spotlight on February’s low at 0.7563, followed closely by trendline resistance-turned support, extended from the high 0.8007, and the 200-day simple moving average at 0.7466.

Rupturing 0.7817, nevertheless, unbolts the door for an approach to supply at 0.8045-0.7985.

Interestingly, the RSI value recently tested trendline support-turned resistance, extended from the low 36.55, though has so far been unable to influence a bearish presence south of the 50.00 centreline. Therefore, traders are urged to pencil in the possibility of a move north to test trendline resistance, drawn from the high 80.12.

H4 timeframe:

Elevated on the back of risk flow—note strong gains witnessed in European equity indexes—the Australian dollar eked out modest gains versus the greenback on Wednesday.

Erasing the majority of Tuesday’s losses, yesterday’s gains lifted price action out of 0.7696-0.7715 demand (this area experienced a whipsaw on Tuesday) and clocked a session peak at 0.7755.

AUD/USD bulls are likely eyeballing Monday’s tops at 0.7766, followed by Quasimodo resistance at 0.7800.

Also of technical relevance is the currency pair has been busy carving out a consolidation between the 0.7800 Quasimodo resistance and the aforesaid demand area since April 20th.

H1 timeframe:

US trade, in spite of efforts to hold beneath the 100-period simple moving average around 0.7737, dethroned the said SMA and crossed paths with resistance at 0.7752.

Territory north of 0.7752 throws light on a Fibonacci cluster between 0.7767 and 0.7760, closely shadowed by Quasimodo resistance at 0.7777.

Interestingly, RSI movement scaled above the 50.00 centreline and clocked tops just south of overbought status, which guided a test of a neighbouring trendline support, extended from the low 24.48.

Observed levels:

Follow-through upside, according to the H4 chart, is a possibility, at least until reaching Monday’s tops at 0.7766. Despite this, short-term buyers face H1 resistance at 0.7752, together with a Fibonacci cluster between 0.7767 and 0.7760 (which houses Monday’s peak at 0.7766).

Longer term, daily eyes likely remain on resistance from 0.7817, consequently drawing attention to the 0.78 figure based on the H1 scale and Quasimodo resistance from 0.7800 on the H4.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following January’s bullish engulfing candle and February’s outperformance, March concluded up by 3.9 percent and marginally cut through descending resistance, etched from the high 118.66.

Although April finished lower by 1.3 percent and snapped the three-month winning streak, the pair is attempting to hold the breached descending resistance, echoing potential support.

Daily timeframe:

Technical structure unchanged from previous analysis.

Despite the monthly timeframe chalking up possible supportive structure, the daily timeframe has price engaging supply at 109.97-109.18.

Trendline support, extended from the low 102.59, serves as a downside target south of current supply; a bullish showing, on the other hand, casts light towards longer-term supply at 110.94-110.29, stationed under another supply at 111.73-111.19.

Trend studies show the unit has been trending higher since the beginning of 2021.

The RSI indicator, although ending last week above the 50.00 centreline (a sign of trend strength), is seen testing resistance at 57.00.

H4 timeframe:

Technical structure unchanged from previous analysis.

61.8% Fib resistance at 109.60—located under supply at 109.97-109.72 (an area positioned within the upper range of daily supply at 109.97-109.18)—remain primary areas on the H4 scale, with support at 108.99 serving as a floor for the time being.

External areas to be aware of are support at 108.50 and neighbouring demand from 108.20-108.43, in addition to supply posted at 110.85-110.46 (fixed within daily supply at 110.94-110.29).

H1 timeframe:

It was another relatively quiet session on Wednesday, with buyers and sellers going toe to toe between the 100-period simple moving average (now circling 109.21) and supply from 109.52-109.39 (a decision point to break the 109.26 low). Despite this, we see sellers attempting to overthrow the aforesaid moving average, as we write.

Below the moving average, 109 stands in sight, joined by trendline support, drawn from the low 107.47. Below 109, however, unmasks demand at 108.57-108.46.

Above current supply, aside from tops around Monday’s peak at 109.69, we can see resistance calling at 109.95, alongside the 110 figure.

Observed levels:

The 109 figure on the H1, aligning with H1 trendline support, is an area short-term buyers may take aim at today, particularly as the 100-period simple moving average is on the verge of giving way. What’s also technically appealing around 109 is H4 support plotted at 108.99.

Technicians are also likely to note monthly currently testing descending resistance-turned support.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

The pendulum swung in favour of buyers following December’s 2.5 percent advance, stirring major trendline resistance (2.1161). February subsequently followed through to the upside (1.7 percent) and refreshed 2021 highs at 1.4241, levels not seen since 2018. Contained within February’s range, however, March and April witnessed decreased volatility.

Despite the trendline breach (which could serve as possible support if retested), primary trend structure has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way (April high 2018).

Daily timeframe:

Technical structure unchanged from previous analysis.

Resistance at 1.4003 has proved a stubborn hurdle since March, capping upside attempts on multiple occasions. Any downside from this base throws light on 1.3670 bottoms, arranged north of Quasimodo support at 1.3609.

Should buyers regain consciousness and brush aside current resistance, Quasimodo resistance at 1.4250 could enter the frame.

From the RSI indicator, the value recently dropped from 58.20 peaks and crossed swords with trendline support, pencilled in from the low 36.14. As you can see, the aforementioned trendline is holding for the time being.

As for trend, GBP/USD has been trending higher since early 2020, despite the two-month retracement.

H4 timeframe:

Technical structure unchanged from previous analysis.

Resistance at 1.3919 continues to reject upside movement, following Monday’s one-sided advance from demand at 1.3809-1.3832.

Upstream—north of 1.3919— brings light to tops around 1.3976, followed by Quasimodo resistance at 1.4007. Below the aforesaid demand brings attention to Quasimodo support at 1.3750, which happens to align with a 1.272% Fib projection at 1.3746 and a 78.6% Fib level at 1.3739 (Fib cluster).

H1 timeframe:

Sellers failed to step in from the 1.39 figure and 100-period simple moving average on Wednesday, highlighting nearby resistance at 1.3929.

As shown on the H1 chart, 1.39 represents support at the moment, aided by the aforesaid moving average. Defending 1.39 as support and taking on 1.3929 resistance potentially sets the technical stage for a run to tops noted on the H4 scale at 1.3976, as well as the 1.40 figure (housed between H1 Fibonacci resistance at 1.4013-1.3988).

Observed levels:

The combination of the 1.39 figure on the H1 and the 100-period simple moving average is a zone possibly on the radar today for short-term buyers. Breaking H1 resistance at 1.3929 could add bullish weight as this would also secure a bullish presence north of H4 resistance from 1.3919.

Longer term, technical eyes are perhaps drawn to daily resistance at 1.4003, which blends closely with the key figure 1.40 on the H1 and Quasimodo resistance on the H4 at 1.4007.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

GBP/USD Price Forecast – British Pound Continues to Consolidate

The British pound has gone back and forth during the course of the trading session on Wednesday as we hang around the 1.39 handle. That is an area that continues to cause a bit of choppiness, and I think that is probably what we are going to see over the next 48 hours. After all, we have the Monetary Policy Committee meeting on Thursday and of course the jobs number on Friday. Ultimately, this is a market that will make a move, but right now it looks as if the 1.40 level above continues to be a massive barrier that the market simply struggles to get beyond. Looking at this chart, I think that we are simply killing time until we get some of those answers.

GBP/USD Video 06.05.21

Underneath, there is a little bit of a double bottom that the market will continue to pay close attention to, and if we were to break down below there then it is likely that the market goes looking towards the 1.35 handle underneath. That is an area where we see the 200 day EMA racing towards, so that should offer a significant amount of support as well. With that being the case, I like the idea of buying in that area if we do get down there, but I just do not see that happening in the short term. Longer-term, I think we are much more likely to break above the 1.40 handle, but that is going to take a significant amount of momentum to make that happen. With this in mind, I like the idea of going long, but I would either wait for a better price, or a breakout above the aforementioned 1.40 handle.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD, GBP/USD Analysis & Setups 5 – 7 May 2021

The EUR/USD is completing a bearish wave 5 in a larger wave A of an ABC zigzag pattern. A bullish ABC bounce in wave B is expected around 1.975-1.20 support zone. The GBP/USD remains choppy and needs a clear breakout first.

If you think our videos, analysis, and education can help you become a better trader, then you can ask your own questions via our form and we will answer them in the weekly live webinar every Tuesday.

EUR/USD & GBP/USD Overview

The EUR/USD bullish bounce could indicate an ABC pattern in wave B towards 1.21 before another bearish swing down aims at the 61.8% Fibonacci level around 1.1875.

The GBP/USD bullish breakout could confirm a wave C of wave B. But eventually a bearish price swing is expected to take price action lower towards the 144 ema on the daily chart.

Check out the video below for the full analysis and trade plans on 5 – 7 May 2021:

EUR/USD, GBP/USD technical analysis: patterns, trends, key S&R levels

  • Explanation of potential trade ideas both up and down
  • Beginner friendly, explaining concepts in more detail

EUR/USD & GBP/USD Video

For a look at all of today’s economic events, check out our economic calendar.

Good trading,

Chris Svorcik
CTA

 

GBP/USD Daily Forecast – British Pound Tries To Gain More Ground Against U.S. Dollar

GBP/USD Video 05.05.21.

Another Test Of Resistance At 1.3900

GBP/USD is currently testing the resistance at 1.3900 while the U.S. dollar is mostly flat against a broad basket of currencies.

The U.S. Dollar Index continues its attempts to settle above the resistance at the 20 EMA at 91.35. This resistance level has already been tested many times and proved its strength. In case the U.S. Dollar Index manages to get above this level, it will move towards the 50 EMA at 91.50 which will be bearish for GBP/USD.

Today, foreign exchange market traders will focus on the economic data from the U.S. ADP Employment Change report is projected to show that private businesses created 800,000 jobs in April. The final reading of Services PMI report for April is projected to show that Services PMI increased from 60.4 in March to 63.1 in April.

Traders will also keep an eye on the developments in U.S. government bond markets after yesterday’s Yellen comments about inflation which put significant pressure on tech stocks. Bond markets managed to stay calm, and the yield of 10-year Treasuries remains below the 20 EMA at 1.61%. If Treasury yields start to move higher on inflation fears, U.S. dollar may get more support.

Technical Analysis

gbp usd may 5 2021

GBP/USD continues its attempts to settle above the resistance at 1.3900. If GBP/USD manages to settle above this level, it will move towards the resistance at 1.3920.

A move above the resistance at 1.3920 will open the way to the test of the resistance at 1.3950. In case GBP/USD manages to settle above this level, it will head towards the next resistance at 1.3980. A successful test of this level will open the way to the test of the resistance at 1.4000.

On the support side, the nearest support level for GBP/USD is located at the 20 EMA at 1.3870. If GBP/USD declines below the 20 EMA, it will move towards the support at the 50 EMA at 1.3845. A move below this level will push GBP/USD towards the support at 1.3800.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data Puts the EUR, Pound, and Dollar in the Spotlight

Earlier in the Day:

It was a relatively busy start to the day on the economic calendar this morning. The Kiwi Dollar and the Aussie Dollar were in action early this morning.

For the Kiwi Dollar

Employment figures were in focus this morning.

In the 1st quarter, employment increased by 0.6%, following a 0.6% rise in the 4th quarter of last year. Economists had forecast a 0.2% rise.

According to NZ Stats,

  • The unemployment rate fell from 4.9% to 4.7% in the March quarter, easing further back from a Q3 peak of 5.2%.
  • While easing back, however, the unemployment remained high compared with recent years.
  • The underutilization rate increased by 0.4 percentage points to 12.2% quarter-on-quarter. Year-on-year, the underutilization rate was up by 1.8 percentage points.
  • Quarter-on-quarter, the employment rate increased from 66.8% to 67.1%, while down by 67.7% from the March quarter of 2020.

The Kiwi Dollar moved from $0.71500 to $0.71701 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.41% to $0.7174.

For the Aussie Dollar

Building approvals were in focus this morning.

In March, building approvals rose by 17.4% following a 21.6% jump in February. Economists had forecast a more modest 3.0% rise.

The Aussie Dollar moved from $0.77254 to $0.77304 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.38% to $0.7736.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.06% to ¥109.26 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic data front. Service sector PMIs for Italy and Spain are due out along with finalized PMIs for France, Germany, and the Eurozone.

Barring marked revisions to prelim figures, Italy’s services PMI and the Eurozone’s Composite PMI will likely have the greatest impact.

The devil will be in the details, with employment, new orders, and sector optimism likely to be material takeaways from the surveys.

At the time of writing, the EUR was up by 0.09% to $1.2025.

For the Pound

It’s a quiet day ahead on the economic calendar. There are no material stats for the markets to consider ahead of the Bank of England monetary policy decision tomorrow.

The lack of stats will leave the Pound in the hands of market risk sentiment on the day.

At the time of writing, the Pound was up by 0.18% to $1.3912.

Across the Pond

It’s a relatively busy day ahead on the economic calendar. The market’s favored ISM Non-Manufacturing PMI is due out along with finalized Markit services and composite PMI numbers.

Ahead of the private sector PMIs, ADP nonfarm employment change figures are also due out.

Expect the ADP nonfarm employment change and Non-Manufacturing PMIs to have the greatest impact on the day.

At the time of writing, the Dollar Spot Index was down by 0.12% to 91.177.

For the Loonie

It’s a quiet day ahead on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction. The lack of stats will leave the Loonie in the hands of crude oil inventory numbers and market risk sentiment on the day.

At the time of writing, the Loonie was up by 0.18% to C$1.2287 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

May 5th 2021: Soured Risk Appetite Elevates Safe-Haven USD Demand; Euro Tests $1.20

Charts: Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following a three-month retracement, demand at 1.1857-1.1352 made an entrance and inspired a bullish revival in April, up 2.4 percent at the close.

April upside throws light on the possibility of fresh 2021 peaks in the months ahead, followed by a test of ascending resistance (prior support [1.1641]).

Based on trend studies, the primary uptrend has been underway since price broke the 1.1714 high (Aug 2015) in July 2017. Additionally, price also breached trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

Largely unchanged from previous analysis.

The 200-day simple moving average remains flirting around 1.1939 levels, a dynamic value that could deliver support if tested. Quasimodo resistance at 1.2169, on the other hand, commands attention to the upside.

Despite the 2021 retracement, trend studies reveal the currency pair has been entrenched within an uptrend since early 2020, movement that many traders will likely refer to as a primary trend on this timeframe.

In terms of RSI action, last week’s withdrawal from 69.00 positions the value within shouting distance of support at 51.36.

H4 timeframe:

Technical structure unchanged from previous analysis.

The Dollar index (ticker: DXY) firmed Tuesday, unwinding a portion of April’s 2 percent decline amid fading risk appetite.

As you can see, this pressured Europe’s single currency to fresh weekly troughs at 1.1998, and consequently tipped the scales in favour of a move to support at 1.1990 and a Fibonacci cluster between 1.1971 and 1.1986 (a defined area on a price chart where Fib retracement levels converge).

Overthrowing the aforesaid Fib cluster unearths additional support at 1.1937 (aligns closely with the 200-day simple moving average on the daily scale), while a rotation to the upside shines light on resistance at 1.2108.

H1 timeframe:

Tuesday’s bearish phase watched the 1.20 figure make an appearance, action that clearly stirred short-term bullish interest mid-way through London hours. Technically interesting here is the support level residing beneath 1.20 at 1.1989, a prior Quasimodo resistance.

RSI movement on the H1 pencilled in bullish divergence yesterday, as price shook hands with 1.20. Subsequent action witnessed the RSI value exit oversold waters to test space just south of the 50.00 centreline.

Observed levels:

Partly modified from previous analysis.

April showing life out of monthly demand from 1.1857-1.1352 reinforces a possible retest (dip-buying scenario) at the 200-day simple moving average from 1.1939 (daily timeframe).

From the H4 timeframe, however, focus is on support at 1.1971/1.1990 (support/Fibonacci cluster). This also unlocks a possible whipsaw through 1.20 on the H1 to test the noted H4 support as well as H1 support at 1.1989. A H1 close back above 1.20—following a 1.1971/1.1990 test—is likely to be interpreted a bullish theme, targeting at least 1.2035 (H1) resistance.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since the beginning of 2021, buyers and sellers have been battling for position south of trendline resistance (prior support – 0.4776 high) and supply from 0.8303-0.8082. Should a bearish scenario unfold, demand at 0.7029-0.6664 (prior supply) is featured to the downside.

Trend studies (despite the trendline resistance [1.0582] breach in July 2020) show the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high [2018]).

Daily timeframe:

Technical structure unchanged from previous analysis.

From mid-April, AUD/USD has been consolidating around resistance from 0.7817.

Territory to the downside shines the technical spotlight on February’s low at 0.7563, followed closely by trendline resistance-turned support, extended from the high 0.8007.

Rupturing 0.7817, nevertheless, unbolts the door for an approach to supply at 0.8045-0.7985.

Interestingly, the RSI value is seen testing trendline support-turned resistance, extended from the low 36.55, and recently nudged south of the 50.00 centreline. North of here, traders are urged to pencil in trendline resistance, drawn from the high 80.12.

H4 timeframe:

A bearish phase unfolded on Tuesday, largely driven on the back of a USD bid amidst safe-haven demand.

Technically, this had price action whipsaw through the walls of 0.7696-0.7715 demand (and trendline support, taken from the low 0.7531), movement which missed a Fibonacci cluster between 0.7657 and 0.7672 by a whisker (green).

Upside targets to be mindful of on the H4 scale are Monday’s tops at 0.7766, followed by Quasimodo resistance at 0.7800.

H1 timeframe:

Early US hours delivered a vigorous whipsaw through 0.77 bids on Tuesday, with enough force to trip protective stops and fill breakout sellers’ sell stops to cause a bear trap. Traders will note that price snapping through 0.77 not only came within striking distance of support at 0.7668, the move was accompanied by RSI bullish divergence and a near-test of RSI support at 19.40 (the value now hovers nearby the underside of the 50.00 centreline).

The absence of supply north of 0.77 unlocks a possible bid today, taking aim at resistance from 0.7752 and the 100-period simple moving average.

Observed levels:

The 0.77 whipsaw on the H1—together with H4 crossing swords with trendline support and coming within a whisker of testing Fibonacci support at 0.7657/0.7672—underlines a potential bullish scenario above 0.77, targeting at least H1 resistance from 0.7752.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following January’s bullish engulfing candle and February’s outperformance, March concluded up by 3.9 percent and marginally cut through descending resistance, etched from the high 118.66.

Although April finished lower by 1.3 percent and snapped the three-month winning streak, the pair is attempting to hold the breached descending resistance, echoing potential support.

Daily timeframe:

Technical structure unchanged from previous analysis.

Despite the monthly timeframe chalking up possible supportive structure, the daily timeframe has price engaging supply at 109.97-109.18.

Trendline support, extended from the low 102.59, serves as a downside target south of current supply; a bullish showing, on the other hand, casts light towards longer-term supply at 110.94-110.29, stationed under another supply at 111.73-111.19.

Trend studies show the unit has been trending higher since the beginning of 2021.

The RSI indicator, although ending last week above the 50.00 centreline (a sign of trend strength), is seen testing resistance at 57.00.

H4 timeframe:

61.8% Fib resistance at 109.60—located under supply at 109.97-109.72 (an area positioned within the upper range of daily supply at 109.97-109.18)—remain primary areas on the H4 scale, with support at 108.99 serving as a floor for the time being.

External areas to be aware of are support at 108.50 and neighbouring demand from 108.20-108.43, in addition to supply posted at 110.85-110.46 (fixed within daily supply at 110.94-110.29).

H1 timeframe:

Monday’s 109 test—aided by the 100-period simple moving average—elevated the currency pair higher on Tuesday, consequently crossing paths with supply at 109.52-109.39 (a decision point to break the 109.26 low) and intersecting trendline support-turned resistance, taken from the low 107.64.

The 109.52-109.39 test, as you can see, pressured short-term flow to the 100-period simple moving average, which replied with a bullish wave back to the aforesaid supply.

Above current supply, aside from tops around Monday’s peak at 109.69, we can see resistance calling at 109.95, alongside the 110 figure. Below 109, however, trendline support, drawn from the low 107.47, is seen close by, with subsequent selling unmasking demand at 108.57-108.46.

Observed levels:

Short-term range traders will likely be drawn to the H1 scale today, as price fluctuates between supply at 109.52-109.39 and the 109 base (along with the 100-period simple moving average). Technicians may also note the 109 figure aligns closely with H4 support at 108.99.

Range traders, however, are urged to pencil in the possibility of whipsaws forming. Directly above H1 supply we have the H4 timeframe’s 61.8% Fib resistance at 109.60, while south of 109 has H1 trendline support ready to accept any fakeout movement.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

The pendulum swung in favour of buyers following December’s 2.5 percent advance, stirring major trendline resistance (2.1161). February subsequently followed through to the upside (1.7 percent) and refreshed 2021 highs at 1.4241, levels not seen since 2018. Contained within February’s range, however, March and April witnessed decreased volatility.

Despite the trendline breach (which could serve as possible support if retested), primary trend structure has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way (April high 2018).

Daily timeframe:

Technical structure unchanged from previous analysis.

Resistance at 1.4003 has proved a stubborn hurdle since March, capping upside attempts on multiple occasions. Any downside from this base throws light on 1.3670 bottoms, arranged north of Quasimodo support at 1.3609.

Should buyers regain consciousness and brush aside current resistance, Quasimodo resistance at 1.4250 could enter the frame.

From the RSI indicator, the value dropped from 58.20 peaks and crossed swords with trendline support, pencilled in from the low 36.14.

As for trend, GBP/USD has been trending higher since early 2020, despite the two-month retracement.

H4 timeframe:

1.3809-1.3832 demand, as you can see, survived Friday’s mild breach, with GBP/USD bulls entering an offensive phase and shaking hands with resistance at 1.3919 on Monday. As evident from the chart, the aforementioned resistance held firm and supported a bearish response on Tuesday.

Below the aforesaid demand brings notice to Quasimodo support at 1.3750, which happens to align with a 1.272% Fib projection at 1.3746 and a 78.6% Fib level at 1.3739 (Fib cluster).

Above 1.3919, nonetheless, brings light to tops around 1.3976, followed by Quasimodo resistance at 1.4007.

H1 timeframe:

Monday embracing resistance at 1.3929 stirred bearish flow, with early hours Tuesday pushing below the 1.39 figure and 100-period simple moving average.

As you can see, Tuesday had price knock on the door of lows at 1.3838 in early US and stage a recovery back to within touching distance of 1.39. A bearish rejection forming from the latter today, with enough force to dethrone Tuesday’s low, throws light on a possible test of 1.38 (a level mingling with a 61.8% Fib level and a 100% Fib projection at 1.3789).

RSI flow has the value attempting to find acceptance north of the 50.00 centreline, following earlier lows at 37.40.

Observed levels:

The combination of the 1.39 figure on the H1 and the 100-period simple moving average is a zone possibly on the radar today. A stab at lower prices from the aforesaid resistances is likely to zero in on H4 demand from 1.3809-1.3832, an area shadowed by the 1.38 figure on the H1.

1.39 shorts, however, must take into account H4 resistance at 1.3919 and H1 resistance from 1.3929, as these levels could pull price higher to collect more sellers (and trip 1.39 stops) before driving lower.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

GBP/USD Price Forecast – British Pound Pulls Back to 50 Day EMA

The British pound has fallen a bit during the course of the trading session on Tuesday to reach down towards the 50 day EMA. Beyond that we also have a double bottom underneath that could come back into the picture, giving buyers a reason to look for support. If we were to break down below there, then it is possible that we could go down to the 200 day EMA which is closer to the 1.35 level. At that point, then you are talking about a trend defining point, and if we were to break down below there, we would have to see some type of flush lower that could send this market towards the 1.30 level.

GBP/USD Video 05.05.21

On the other hand, if we continue to see buyers on these dips, I anticipate we probably do not have much further to go to the downside before we continue to build up positive pressure to go looking towards 1.40 level above, which of course has been a massive barrier as you can see. If we can break above there, then the British pound is likely to go looking towards the 1.42 handle above which has been significant resistance, and I think what we are looking at in that general vicinity is the gateway to reach towards the 1.45 handle. Ultimately, it is likely that we will continue to see a push higher, due to the fact that most people are betting on the “reopening trade”, which generally means that the US dollar will probably continue to drop. That being said, in the short term it looks like we are simply chopping around and building up inertia.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Strong Zone is Supporting the Bulls

The GBP/USD has made a strong retracement and now the price is exactly at the 61.8 fib retracement of the last swing.

W H3/D H3 rejection is expected as it constitutes the POC zone 1.3850-70 We should see a move towards the W H4 – 1.3915. A successful retest of 1.3938 is also possible. In that case look for a possible breakout or a bounce. If it happens 1.3975 is next. Bulls should be safe as long as the price is above 1.3820.

For a look at all of today’s economic events, check out our economic calendar.

Cheers and safe trading,

Nenad

 

GBP/USD Daily Forecast – British Pound Pulls Back After Yesterday’s Upside Move

GBP/USD Video 04.05.21.

British Pound Is Losing Ground Against U.S. Dollar

GBP/USD is currently trying to get to the test of the 20 EMA at 1.3870 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index managed to get back above the 91 level and is heading towards the resistance at the 20 EMA at 91.30. If the U.S. Dollar Index manages to settle above the 20 EMA, it will gain upside momentum and head towards the next resistance at 91.50 which will be bearish for GBP/USD.

Yesterday, U.S. reported that Manufacturing PMI increased from 59.1 in March to 60.5 in April compared to analyst consensus of 60.6. Construction Spending grew by 0.2% month-over-month in March while analysts expected that it would grow by 1.9%.

Today, foreign exchange market traders will have a chance to take a look at the final reading of UK Manufacturing PMI report for April. Analysts expect that UK Manufacturing PMI increased from 58.9 in March to 60.7 in April.

Technical Analysis

gbp usd may 4 2021

GBP/USD faced resistance at 1.3900 and pulled back. Currently, GBP/USD is trying to get to the test of the nearest support level which is located at the 20 EMA at 1.3870.

If GBP/USD manages to settle below the support at 1.3870, it will head towards the next support at the 50 EMA at 1.3845. In case GBP/USD declines below the 50 EMA, it will move towards the support level at 1.3800. This support level has been tested several times during recent trading sessions and proved its strength.

On the upside, GBP/USD needs to settle above the resistance at 1.3900 to have a chance to continue its rebound. If GBP/USD gets above this level, it will head towards the next resistance at 1.3920.

A successful test of the resistance at 1.3920 will open the way to the test of the next resistance at 1.3950. If GBP/USD settles above this level, it will head towards the resistance at 1.3980.

From a big picture point of view, GBP/USD remains range-bound, and it will likely need additional catalysts to gain momentum.

For a look at all of today’s economic events, check out our economic calendar.

Is the UK’s Forecast Path to Monetary Normalisation Too Slow and Shallow?

Viewed against February’s +2.2% reading and January’s -8.1%, an argument can be made that consumer confidence is rapidly returning, auguring well for a strong post-pandemic recovery. However, could this returning confidence be too strong? Specifically, could it see the large savings stock accumulated over the pandemic finance a spending surge capable of steepening the trajectory to monetary normalisation?

Will the UK savings rate return to its long run average?

The unknown variable when discussing the strength of consumption recovery is the degree to which households will draw upon savings to finance excess spending. Averaging around 8.5% since the 1960s, ONS figures show the savings ratio rose to 25.9% in Q2 2020 before dropping to a still high 16.1% in Q4. Not only can these savings be viewed as an intertemporal substitution of consumption, but also an increase in wealth.

Historically, around 5% of excess wealth is spent each year, a figure being used by the BoE in its policy forecasts. However, given how these savings have been accumulated – forced consumption compression rather than an aspiration to save – it is reasonable to think that once lockdown restrictions are removed more than 5% will be spent, with the savings ratio also falling back to its long run average. Further, BoE figures show these savings have largely accumulated in deposit accounts rather than repositories such as pension funds and equities, increasing the temptation to draw on them given their easy access.

How much recourse to savings will be made?

The strength of any savings-fuelled spending spree is unknown at this stage. With the bulk of these savings accumulated by higher income households and pensioners, with typically a lower propensity to consume, it may be only modest. Much may therefore depend on the behaviour of lower income households. But in the opposite direction, the boom in ‘staycations’ expected this summer will provide an atypical boost to domestic expenditure. Overall, it remains unclear exactly how things will pan out. But the evidence so far suggests it is an issue that should be sounding warnings for the BoE, with at least the acknowledgment of a potential policy response.

Will pent-up demand see the BoE falling behind the policy curve?

The lack of spending opportunities has almost certainly left pent-up demand that consumers will look to satiate going forward. High frequency data from the BoE shows card spending already rising to 89% of pre-pandemic levels from 12th April when lockdown restrictions started to be lifted; in the same vein, footfall data shows consumers returning in large numbers to shopping malls and retail outlets.

This demand will help offset the closing of the furlough scheme end-Q3, with potentially fewer jobs lost and new positions created, allowing unemployment to peak at a lower rate than the BoE is forecasting. But crucially, this removes some of the pressure expected to bear down on potential inflation. The result could be higher CPI that remains above the BoE’s 2% target next year rather than dropping back below it as currently forecast.

Normally such an increase in demand would see interest rates raised. But the BoE’s standpoint is to refrain from tightening until the economic recovery is entrenched, i.e., until spare capacity is eliminated and the 2% inflation target on a sustainable footing. Unless this message changes – and at this stage that appears unlikely – any financial tightening necessitated by this pent-up demand will be provided by the financial markets only. Official policy looks likely to remain too loose.

Do current policy assumptions need revising?

Early data suggests the BoE’s policy assumptions may be too soft, that the anticipated 5% savings-fuelled boost to consumption too conservative and that inflationary pressures might require a monetary policy response more aggressive than currently forecast. Market pricing sees a first 15bps hike delivered in Q1 2023; the proposition is that this may be too little, too late, and that a full 25bps rise may be required in 2022. And this matters more than just to the markets. Government borrowing built up over the pandemic – £303bn over the last financial year – requires financing.

While current low interest rates make this affordable, a faster and steeper rise in borrowing costs could put a hole in the Government’s fiscal plans, potentially requiring further spending cuts and/or tax rises to be made. Accordingly, both the BoE and the Government will be hoping consumers keep their excess savings in the bank.

Opinion editorial by Stuart Cole, Head Macro Economist at Equiti Capital


‘’This material is provided for informational purposes only and does not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Equiti Capital. This material is not, and is not intended to be, a “research report”, “investment research” or “independent research” as may be defined in applicable laws and regulations worldwide. Please see the full disclaimer here: https://www.equiticapital.co.uk/media/11057/disclaimer.pdf ’’

Economic Data Puts the Loonie and the Greenback in Focus

Earlier in the Day:

It was a busier start to the day on the economic calendar this morning. The Aussie Dollar was in action early this morning.

Later this morning, the RBA is also in action. With the markets expecting the RBA to stand pat, the rate statement will be key.

For the Aussie Dollar

In March, the trade surplus narrowed from A$7.529bn to A$5.574bn. Economists had forecast a widening to A$8.000bn.

According to ABS,

  • Goods and services credits fell A$681m (-2%) to A$38,274m.
    • An A$708m fall in the export of non-monetary gold contributed to the fall in total exports.
    • Rural goods exports saw a modest A$28m fall, while the exports of general merchandise rose by A$128m.
    • Total services credits also weighed, falling by A$101m.
  • Imports rose by A$1,340m (4%) to A$32,700m.
    • General merchandise debits jumped by A$790m, with non-monetary gold imports up A$529m.
    • There were also increases in the imports of consumer goods (A$147m), capital goods (A$309m), and intermediate and other merchandise goods (A$334m).

The Aussie Dollar moved from $0.7745 to $0.77434 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.26% to $0.7743.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.17% to ¥109.25 against the U.S Dollar, with the Kiwi Dollar down by 0.21% to $0.7186.

The Day Ahead:

For the EUR

It’s a quiet day ahead on the economic data front. There are no material stats due out of the Eurozone to provide  to provide the EUR with direction.

The lack of stats will leave the EUR in the hands of market risk sentiment on the day. Following disappointing GDP numbers from last week, the EUR could come under more scrutiny with little else to consider.

At the time of writing, the EUR was down by 0.13% to $1.2048.

For the Pound

It’s a quiet day ahead on the economic calendar. April’s finalized Manufacturing PMI is due out later today.

Barring a marked revision from prelim figures, however, the numbers should have a muted impact on the Pound.

With the UK economy continuing to open up, market optimism should continue to support the Pound at current levels ahead of the BoE policy decision on Thursday.

At the time of writing, the Pound was down by 0.20% to $1.3883.

Across the Pond

It’s a quieter day ahead on the economic calendar. March trade data and factory orders are due out later today.

While trade data will be of interest, factory orders will have the greatest influence on market risk sentiment.

At the time of writing, the Dollar Spot Index was up by 0.16% to 91.091.

For the Loonie

It’s a relatively busy day ahead on the economic calendar. Building permit figures and trade data are due out later today.

Expect the trade data to have the greatest impact on the Loonie. With the BoC’s shift in policy outlook, a marked widening in the trade surplus would deliver the Loonie with another boost.

At the time of writing, the Loonie was down by 0.12% to C$1.2294 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

May 4th 2021: USD on the Backfoot Amid Disappointing Data; DXY Beneath 91.00

Charts: Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following a three-month retracement, demand at 1.1857-1.1352 made an entrance and inspired a bullish revival in April, up 2.4 percent at the close.

April upside throws light on the possibility of fresh 2021 peaks in the months ahead, followed by a test of ascending resistance (prior support [1.1641]).

Based on trend studies, the primary uptrend has been underway since price broke the 1.1714 high (Aug 2015) in July 2017. Additionally, price also breached trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

The 200-day simple moving average at 1.1937 serves as dynamic support, in the event of a push southbound.

Quasimodo resistance at 1.2169, on the other hand, commands attention to the upside.

Despite the 2021 retracement, trend studies reveal the currency pair has been entrenched within an uptrend since early 2020, movement that many traders will likely refer to as a primary trend on this timeframe.

In terms of RSI movement, last week’s withdrawal from 69.00 took the indicator to within striking distance of support at 51.36.

H4 timeframe:

Europe’s single currency, as can be seen from the H4 chart, eked out modest gains against the US dollar on Monday, leaving support at 1.1990 and a Fibonacci cluster between 1.1971 and 1.1986—a defined area on a price chart where Fib retracement levels converge—unchallenged.

As for risk events, the calendar was somewhat thin. Though according to the Institute for Supply Management (ISM), US manufacturing grew at a slower pace in April (60.7 vs. consensus estimate 65.0).

Overthrowing the aforesaid Fib cluster unearths additional support at 1.1937 (aligns with the 200-day simple moving average on the daily scale), while a continued rotation to the upside shines light on resistance at 1.2108.

H1 timeframe:

Monday discovered a floor just north of the 1.20 figure, a level stationed above another layer of support at 1.1989 (prior Quasimodo resistance). The bullish stance subsequently elevated EUR/USD to within a whisker of supply at 1.2091-1.2077—houses the 100-period simple moving average at 1.2083. Also of technical relevance is the 1.21 figure located just above current supply.

From the RSI oscillator, we can see the value climbed from oversold space, reclaimed resistance at 35.45 and engulfed the 50.00 centreline. This suggests further upside momentum could be on the cards, with RSI (overbought) resistance arranged at 78.97.

Observed levels:

Partly modified from previous analysis.

April showing life out of monthly demand from 1.1857-1.1352 reinforces a possible retest (dip-buying scenario) at the 200-day simple moving average from 1.1937 (daily timeframe).

Shorter-term action, however, has H1 facing supply at 1.2091-1.2077, the 100-period simple moving average and the 1.21 figure as a potential ceiling. This area also brings with it additional fuel in the shape of H4 resistance nearby at 1.2108 and, therefore, could ignite a bearish scenario.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since the beginning of 2021, buyers and sellers have been battling for position south of trendline resistance (prior support – 0.4776 high) and supply from 0.8303-0.8082. Should a bearish scenario unfold, demand at 0.7029-0.6664 (prior supply) is featured to the downside.

Trend studies (despite the trendline resistance [1.0582] breach in July 2020) show the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high [2018]).

Daily timeframe:

Since mid-April, AUD/USD has been seen consolidating around resistance from 0.7817.

Territory to the downside shines the technical spotlight on February’s low at 0.7563, followed closely by trendline resistance-turned support, extended from the high 0.8007.

Rupturing 0.7817, nevertheless, unbolts the door for an approach to supply at 0.8045-0.7985.

Interestingly, the RSI value is seen testing trendline support-turned resistance, extended from the low 36.55. North of here, traders are also urged to pencil in trendline resistance, drawn from the high 80.12.

H4 timeframe:

The consolidation visible on the daily scale also dominates the H4, as buyers and sellers square off between 0.7800 Quasimodo resistance and 0.7696-0.7715 demand (blends with trendline support, taken from the low 0.7531).

Should price rupture the noted demand, a Fibonacci cluster between 0.7657 and 0.7672, is seen lying in wait, while demand-turned supply at 0.7848-0.7867 calls for attention north of 0.7800.

H1 timeframe:

Amidst a bout of USD weakness Monday, EUR/USD lifted above resistance at 0.7752 and the 100-period simple moving average at 0.7757, with price action subsequently retesting 0.7752 as support and forming a dragonfly doji candle—bullish signal.

Quasimodo resistance is plotted overhead at 0.7777, with further outperformance casting focus towards the 0.78 figure (also represents H4 Quasimodo resistance).

With respect to momentum, as measured by the RSI, the value recorded a mild top, a stone’s throw from overbought territory.

Observed levels:

0.7800 Quasimodo resistance on the H4 is likely to attract technical attention. Not only does the level represent a psychological base (applied to the H1), 0.7800 aligns closely with daily resistance at 0.7817.

Short-term flow, on the other hand, shows that scaling higher could also be on the table. The retest of H1 support at 0.7752, and nearby 100-period simple moving average, may have intraday bulls take aim at H1 Quasimodo resistance at 0.7777, followed then by the noted 0.78 neighbourhood.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following January’s bullish engulfing candle and February’s outperformance, March concluded up by 3.9 percent and marginally cut through descending resistance, etched from the high 118.66.

Although April finished lower by 1.3 percent and snapped the three-month winning streak, the pair is attempting to hold the breached descending resistance, echoing potential support.

Daily timeframe:

Partly modified from previous analysis.

Despite the monthly timeframe chalking up possible supportive structure, the daily timeframe watched price establish a half-hearted shooting star pattern on Monday—bearish candlestick signal—from supply pinned at 109.97-109.18. As you can see, the bearish formation also snapped a two-day winning streak.

Trendline support, extended from the low 102.59, serves as a downside target south of current supply; a bullish showing, on the other hand, casts light towards longer-term supply at 110.94-110.29, stationed under another supply at 111.73-111.19.

Trend studies show the unit has been trending higher since the beginning of 2021.

The RSI indicator, although ending last week above the 50.00 centreline (a sign of trend strength), is seen engaging resistance at 57.00.

H4 timeframe:

61.8% Fib resistance at 109.60—located under supply at 109.97-109.72—provided a platform for sellers to work with on Monday. This rejuvenated a bearish presence and pencilled in a retreat back to support at 108.99, which, for now, holds.

Space south of 108.99 shines light back on support at 108.50 and neighbouring demand from 108.20-108.43.

H1 timeframe:

Monday’s bearish narrative shaped clear-cut supply at 109.52-109.39—a decision point to break the 109.26 low and trendline support, pencilled in from the low 107.64. Ensuing action observed a 109 test, a level accompanied by the 100-period simple moving average at 108.99.

The lack of buyer intent from 109 unearths potential selling, targeting another trendline support, taken from the low 107.47.

The view from within the RSI has the value attempting to discover support around the 40.00 region. Dipping a toe in oversold waters, however, highlights support from 18.76.

Observed levels:

Though 109 has so far failed to stir much bullish curiosity on the H1, the psychological base still echoes strength, technically speaking, as it joins hands with the 100-period simple moving average, H4 support at 108.99, and also seeing monthly price defending the descending resistance-turned possible support.

H1 failing to hold 109, however, could see a short-term dip to trendline support, taken from the low 107.47, a move that may also stir dip-buying activity.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

The pendulum swung in favour of buyers following December’s 2.5 percent advance, stirring major trendline resistance (2.1161). February subsequently followed through to the upside (1.7 percent) and refreshed 2021 highs at 1.4241, levels not seen since 2018. Contained within February’s range, however, March and April witnessed decreased volatility.

Despite the trendline breach (which could serve as possible support if retested), primary trend structure has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way (April high 2018).

Daily timeframe:

Partly modified from previous analysis.

Resistance at 1.4003 has proved a stubborn hurdle since March, capping upside attempts on multiple occasions. Any downside from this base throws light on 1.3670 bottoms, arranged north of Quasimodo support at 1.3609.

Should buyers regain consciousness and brush aside current resistance, Quasimodo resistance at 1.4250 could enter the frame.

From the RSI indicator, the value dropped from 58.20 peaks and crossed swords with trendline support, pencilled in from the low 36.14.

As for trend, GBP/USD has been trending higher since early 2020, despite the two-month retracement.

H4 timeframe:

1.3809-1.3832 demand, as you can see, survived Friday’s mild breach, with GBP/USD bulls entering an offensive phase and shaking hands with resistance at 1.3919. Should sellers fail to find grip from the aforementioned resistance, technicians are likely to watch Quasimodo resistance at 1.4007.

Below the aforesaid demand brings notice to Quasimodo support at 1.3750, which happens to align with a 1.272% Fib projection at 1.3746 and a 78.6% Fib level at 1.3739 (Fib cluster).

H1 timeframe:

Launching above 1.39 and the 100-period simple moving average on Monday guided H1 candles to neighbouring resistance at 1.3929 and put a cap on intraday gains.

The reaction from 1.3929 witnessed price retreat to within a pip of 1.39 and the 100-period simple moving average. Interestingly, a bullish showing north of 1.39, movement that scales 1.3929, unlocks the possibility of reaching as far north as the 1.40 figure.

From the RSI, we can see the indicator recently forged hidden bearish divergence at overbought territory, with the value settling Monday around the 60.00 region.

Observed levels:

1.39 buyers (H1) face H1 resistance at 1.3929 and H4 resistance at 1.3919. Buyers finding acceptance above the aforesaid resistances brings light to a potential bullish wave towards the 1.40 resistance area (1.40 figure [H1], H4 Quasimodo resistance at 1.4007 and daily resistance at 1.4003).

1.39 giving way, nonetheless, may spark a short-term bearish scenario, targeting at least H1 support at 1.3864.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

GBP/USD Price Forecast – British Pound Recovers From 50 Day EMA

The British pound has rallied a bit during the course of the trading session on Monday, as the 50 day EMA has offered a lot of support. That being said, the market is likely to continue to see a lot of choppy behavior, because quite frankly the 1.40 handle above has been massive resistance, and an area where the British pound simply does not seem to be able to get beyond. With that being said, we are most certainly in an uptrend, so you have to look at it through that prism. With that being said, I do like the idea of buying dips as they offer value.

GBP/USD Video 04.05.21

If we do break above the 1.40 handle, then it is likely that the market goes looking to the 1.42 handle. The 1.42 handle is a large, round, psychologically significant figure, but more importantly it is an area where we have seen a lot of selling pressure, denoted by the massive shooting star that we formed that level.

Underneath, the market is showing signs of support at the double bottom underneath, and therefore it is very likely there should be buyers in that area. On the other hand, if we were to break down below that level then it is possible that we go looking towards the 200 day EMA underneath which is near the 1.35 handle, which I look at as the “floor the market” overall, and I do think that a lot of traders will be defending that area. If we were to break down below that level, then it would obviously be a negative turn of events for the market.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Daily Forecast – British Pound Remains Under Pressure After Recent Sell-Off

GBP/USD Video 03.05.21.

British Pound Continues To Move Lower Against U.S. Dollar

GBP/USD settled below the 50 EMA at 1.3840 and is trying to get to the test of the next support level at 1.3800 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index is currently testing the resistance which is located at the 20 EMA at 91.35. If this test is succesful, the U.S. Dollar Index will head towards the 50 EMA at 91.50 which will be bearish for GBP/USD.

Today, foreign exchange market traders will have a chance to take a look at the final reading of U.S. Manufacturing PMI report for April. Analysts expect that Manufacturing PMI increased from 59.1 in March to 60.6 in April. Construction Spending is projected to grow by 2% month-over-month in March after declining by 2% in February.

Traders will also keep an eye on the developments in the U.S. government bond markets. Treasury yields lack direction at the beginning of the week, but the continuation of the previous upside move may provide additional support to the American currency.

Technical Analysis

gbp usd may 3 2021

GBP/USD is currently moving towards the support level at 1.3800. RSI remains in the moderate territory after the recent sell-off, and there is plenty of room to gain additional downside momentum.

In case GBP/USD manages to settle below the support at 1.3800, it will head towards the next support level at 1.3785. A successful test of this level will open the way to the test of the support at 1.3745. In case GBP/USD declines below the support at 1.3745, it will head towards the support at 1.3710.

On the upside, the previous support at the 50 EMA at 1.3840 will serve as the first resistance level for GBP/USD. If GBP/USD manages to settle above this level, it will head towards the next resistance which is located at the 20 EMA at 1.3855. A successful test of the resistance at 1.3855 will push GBP/USD towards the next resistance at 1.3900 although it may also face some resistance near 1.3865.

For a look at all of today’s economic events, check out our economic calendar.

A Busy Economic Calendar Puts the EUR and the Dollar in Focus

Earlier in the Day:

It was a quieter start to the day on the economic calendar this morning. The Aussie Dollar was in action early this morning.

For the Aussie Dollar

In April, the AIG Manufacturing Index rose from 59.9 to 61.7.

According to the AIG report,

  • April’s PMI hit the highest level since Mar-2018 and the third highest under the current format of the report.
  • All six manufacturing sectors expanded, as did all seven activity indicators.
  • Australia’s capacity utilization index hit a record high, suggesting a need for increased employment and / or investment.

The Aussie Dollar moved from $0.77167 to $0.77170 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.10% to $0.7724.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.21% to ¥109.54 against the U.S Dollar, with the Kiwi Dollar up by 0.18% to $0.7175.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic data front. Manufacturing PMI figures for Italy and Spain and finalized PMIs for France, Germany, and the Eurozone are due out.

German retail sales figures will also be in focus ahead of the PMI numbers.

Barring marked revision to prelim figures, Italy and the Eurozone’s manufacturing PMIs and German retail sales will be key.

At the time of writing, the EUR was up by 0.01% to $1.2021.

For the Pound

It’s yet another particularly quiet day ahead on the economic calendar.

There are no material stats to provide the Pound with direction, with the UK markets closed.

At the time of writing, the Pound was up by 0.01% to $1.3824.

Across the Pond

It’s a busy day ahead on the economic calendar. The market’s favored ISM Manufacturing PMI figures for April are due out. Finalized Markit survey manufacturing PMI figures are also due out though we would expect the ISM number to be key.

Late in the day, FED Chair Powell is also scheduled to speak. Expect any deviation from the recent guidance to influence.

At the time of writing, the Dollar Spot Index was up by 0.02% to 91.298.

For the Loonie

It’s a quiet day ahead on the economic calendar. There are no material stats to provide the Loonie with direction.

Expect Manufacturing PMI numbers and COVID-19 news updates to influence.

At the time of writing, the Loonie was up by 0.09% to C$1.2295 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

The Dollar can Build on the Pre-Weekend Gains

The Japanese yen was a notable exception. The rise in US yields helped lift the greenback nearly a percent against the yen. The Fed’s standpat stance in light of the surging economy and signals the Norwegian central bank and the Bank of Canada seemed dovish. The contrast carried the Norwegian krone and Canadian dollar to new three-year highs last week. Even if the greenback’s pre-weekend advance was exaggerated, it looks to be turning after trending lower in April.

The Federal Reserve’s broad trade-weighted nominal dollar index fell by about 7.5% in the last three quarters of 2020 after rising by 4.6% in Q1 as the pandemic struck and the dollar was bought partly as a safe haven. In addition, it was partly a function of unwinding structured positions that used the greenback as a funding currency. It gained 1.3% in Q1 21 but traded with a heavier bias in April and surrendered most of the Q1 gains, falling over 1%. Moreover, the technical indicators for the dollar have been stretched by its persistent decline in recent weeks. Frequently, it seems that the short-term trends in the dollar are reversed or consolidated around the US employment data. The April report is released on May 7, and another strong report is anticipated.

Our broad macro view is that given the large US fiscal and trade deficit (the March goods balance reported last week widened to a new record high deficit of a little more than $90 bln) requires higher yields or a weaker dollar, or some combination thereof. The fact that the US 10-year yield rose nearly 83 bp in Q1 and the dollar strengthened, and the yield fell in April, and so did the dollar is not coincidentally. We do not want to overstate the link between exchange rate and yields. The long-term relationship does not appear linear but cyclical. However, when trying to discern the recent broad trend, the foreign exchange market seems particularly sensitive to US rates.

Dollar Index

The Dollar Index fell by about 2.5% in April, essentially unwinding the March gain. The pre-weekend advance, helped apparently by month-end position adjustments, was the most since early March. Tentative support was found near 90.40. The MACD looks poised to turn higher, but the Slow Stochastic has flatlined in the overextended territory. The close above 91.15 may help stabilize the tone. To signal a correction to April, the 91.55 area may be overcome. Above there, 92.00 comes back into view.

Euro

The dovish Fed lifted the euro to $1.2150, its highest level since the end of February. Sellers greeted it and pushed it back to around $1.2015 ahead of the weekend. The move seemed exaggerated by month-end adjustments. Follow-through selling will likely test support is likely in the $1.1980-$1.2000 area. The momentum indicators are stalling. In the near term, we are more inclined to sell into strength than buy dips. Three-month euro volatility (implied) slipped below 5.5% before the weekend, its lowest level since March 2020, but closed near session highs.

Japanese Yen

The dollar bounced smartly against the yen last week. It had finished the previous week below JPY108, but the rise in US yields seemed to fuel the greenback’s recovery. After falling in nine of the past ten sessions, the dollar rose at the beginning of last week and recorded higher highs until consolidating ahead of the weekend and month-end. The MACD and Slow Stochastics have turned up, suggesting the dollar’s recovery will continue.

The dollar rose above JPY109.30 before the weekend to push and closed above the (50%) retracement of April’s decline. The next retracement target (61.8%) is near JPY109.65, and then the JPY110 level beckons. Implied vol trended lower in April alongside the dollar. The dollar’s recovery is likely to see higher implied vol, which at a little below 6%, is also near its 20-day moving average.

British Pound

A five-day advance rally was halted before the weekend as it pulled back and slipped below the 20-day moving average (~$1.3850). Once again, the market was reluctant to push it above $1.40. Sterling has not closed above that threshold since the end of February, though it has flirted with it several times. The pre-weekend drop succeeded in turning sterling lower for the week after threatening to extend its weekly advance to three. The momentum indicators stalled. Many observers see the local elections, and the election in Scotland, in particular, as a risk to sterling.

On the other hand, the Bank of England is expected to be upbeat as the fiscal stimulus and vaccine will spur a recovery sooner and stronger than previously projected. If $1.40 is the upper end of the range, then the $1.3670 area has been the lower end of the range. Initial support is seen around $1.3800. Three-month sterling vol fell below 7% last week to make a marginal new low since last March.

Canadian Dollar

The Canadian dollar was easily the strongest currency last week, gaining 1.5% against its US counterpart. It the fourth consecutive weekly advance, and it was the biggest of the year. The central bank has begun tapering, rising commodity prices is seen as constructive, and its 1.6% expansion in Q1 matches the US. However, a note of caution is generated as the US dollar closed below the lower Bollinger Band every day last week and finished the week on its lows. Another note of caution comes from the market that may be getting ahead of itself as it prices in three rate hikes by the end of 2023.

The momentum indicators are still falling, and the Slow Stochastic is stretched, and the US dollar still made new three-year lows ahead of the weekend. Initial resistance is seen near CAD1.2335 and then CAD1.2400. The low from 2018 is about CAD1.2250, and below there, chart support is sparse until the 2017 low of almost CAD1.2060. Implied volatility has begun rising. It had briefly fallen below 6% near-mid April, its lowest level since last July, but finished above 6.5%.

Australian Dollar

Rising commodity prices, including industrial metals, and a dovish Federal Reserve failed to sustain an Aussie rally above $0.7800. While it flirts and penetrates it on an intraday basis, it has failed to close above it since the end of February. Indeed, it finished the week close at its lowest level in about two and a half weeks, a tad above $0.7700, briefly dipping below it in a thin NY Friday afternoon. The momentum indicators a mixed. The Aussie spent April mostly in the $0.7600-$0.7800 range and largely above $0.7700 since mid-monthly. A break warns of a return to the lower end of the range.

The RBA meets on May 5 in Sydney. It may be a bit early for it to signal that it too wants to pull back from its extraordinary monetary support, but it seems like a good candidate for later Q3. The central bank will publish new economic projections at the end of the week, ahead of the government’s budget announcement the following week. Three-month vol is trading in its trough below 9.0%. It reached 8.75% last week, its lowest level since last March.

Mexican Peso

The peso had its worst week in a couple of months, falling in four of the five sessions. It snapped a four-week advance with a 2,1% decline, making it the second-worst performing emerging market currency after the Colombian peso (~-2.4%). Higher global interest, including a modest rise in US yields and the prospect of another 75 bp hike in Brazil in the week ahead, encouraged some profit-taking.

News of a large and unexpected trade deficit ($3 bln in March) was not helpful, but the surprising expansion in Q1 (0.4% quarter-over-quarter GDP) did not prevent the peso from extending its losses. The US dollar finished the week around MXN20.2460, its best level since April 16. The MACD and Slow Stochastic have turned up. It met the (38.2%) retracement objective of the decline since late March high near MXN20.2350. The halfway mark is about MXN20.3730.

Chinese Yuan

The broad dollar gains ahead of the weekend halted the yuan’s four-day advance. It was only the second session that the greenback gained over the redback in three weeks. Still, the dollar fell for the fourth consecutive week, which followed a six-week advance. Over the four-week streak, the yuan rose by 1.6%, making it the second strongest currency in the region after the Taiwanese dollar (~2.1%).

If the dollar strengthens in the near term, as it looks likely against a range of currencies, it can return to the CNY6.50 area. The yuan and the euro remain highly correlated. On a purely directional basis, the correlation over the past 30 and 60 days is slightly more than 0.85. The onshore market will be closed the first part of next week to celebrate the May Day holiday.

This article was written by Marc Chandler, MarctoMarket.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Central Banks, Economic Data, and COVID-19 in Focus

On the Macro

It’s a quieter week ahead on the economic calendar, with 57 stats in focus in the week ending 7th May. In the week prior, 61 stats had been in focus.

For the Dollar:

In the 1st half of the week, private sector PMIs and ADP nonfarm employment change figures are in focus.

Expect the market’s favored ISM Non-Manufacturing PMI and ADP figures to be key.

The focus will then shift to the weekly jobless claim figures on Thursday ahead of the NFP numbers on Friday.

Expect nonfarm payroll figures and the unemployment rate to be the main area of focus late in the week.

On the monetary policy front, FED Chair Powell is scheduled to speak early in the week. The markets will be looking for any break from the script.

In the week, the Dollar ended the week up by 0.46% to 91.280.

For the EUR:

It’s also a busy the week on the economic data front.

Monday through Wednesday, private sector PMIs for Italy and Spain and German retail sales figures are in focus.

While retail sales are key, expect Italy and the Eurozone’s private sector PMIs to be key.

Late in the week, the German economy is back in focus.

German factory orders, industrial production, and trade data are due out. Following some disappointing GDP numbers last week, we can expect EUR sensitivity to the stats.

On the monetary policy front, ECB President Lagarde is due to speak at the end of the week…

The EUR ended the week down by 0.64% to $1.2020.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

Finalized private sector PMIs will be in focus in a shortened week.

Expect any revisions to the services PMI to be key.

The main event of the week, however, is the BoE’s monetary policy decision on Thursday.

While the BoE is expected to stand pat, any dissent and hawkish talk give the Pound a boost.

The Pound ended the week down by 0.39% to $1.3822.

For the Loonie:

It’s a quiet week ahead on the economic calendar.

On Tuesday, trade data for March will influence ahead of April employment and Ivey PMI figures on Friday.

Expect the employment figures to be the key driver at the end of the week.

The Loonie ended the week up 1.51% to C$1.2288 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively quiet week ahead.

Key stats include manufacturing data at the start of the week and trade data on Tuesday.

Building approvals are also due out on Wednesday but will likely have a muted impact on the Aussie Dollar.

While we can expect the trade data to have the greatest impact, the RBA monetary policy decision is the main event of the week on Tuesday.

Any hawkish chatter and expect the Aussie Dollar to eye a return to $0.80 levels.

The Aussie Dollar ended the week down by 0.30% to $0.7716.

For the Kiwi Dollar:

It’s a relatively quiet week ahead.

On Wednesday, employment figures for the 1st quarter are due out ahead of building consent numbers on Thursday.

Expect the employment change figures to be key in the week. The markets will be looking from a pickup in hiring to support a sustainable economic recovery.

The Kiwi Dollar ended the week down by 0.51% to $0.7162.

For the Japanese Yen:

It is a quiet week ahead, with the Japan markets closed Monday through Wednesday.

Economic data is limited to finalized private sector PMIs for April. Barring any marked revision from prelim figures, however, we don’t expect too much impact on the Yen.

The Japanese Yen rose by 0.85 to ¥107.88 against the U.S Dollar.

Out of China

It’s a busy week ahead.

Through the 1st half of the week, the market’s preferred Caixin survey PMI numbers are due out. Expect the manufacturing PMI for April to have the greatest impact on Tuesday.

At the end of the week, April trade figures will also be in focus.

A continued surge in both imports and exports would support riskier assets.

The Chinese Yuan ended the week up by 0.33% to CNY6.4749 against the U.S Dollar.

Geo-Politics

U.S and China and U.S and Russia relations remain the main areas of focus in the week ahead.

The markets will also need to monitor any chatter from Iran, however.

Corporate Earnings

While a number of the big names have released earnings results, a large number are still scheduled to release results in the week ahead.

From the U.S, big names include CVS Health Corp (Tues), ICHOR Holdings (Tues), and FOX Corp (Wed).