GBP/USD Could Fall Additional as USD Power Persists

GBP worth, information and evaluation:

  • GBP/USD has been falling steeply since Friday, largely on account of USD energy.
  • That weak point might effectively persist because the pair nears crucial help ranges.
  • The UK flash buying managers’ indexes (PMIs) for November, launched this session, got here in above economists’ expectations however had no influence on GBP.

GBP nonetheless underneath downward strain

GBP/USD will possible prolong the falls that started final Friday because the US Dollar continues to profit from the reselection of Jay Powell as chair of the US Federal Reserve. His reappointment is now anticipated to be a formality, and that might effectively imply a sooner withdrawal of US financial stimulus and a number of other US rate of interest will increase subsequent yr.

Furthermore, the prospect of a UK rate of interest hike when the Financial institution of England’s financial coverage committee subsequent meets on December 16 remains to be absolutely priced in to the markets, which means there’s little upside for GBP/USD if that’s confirmed, and substantial draw back if it isn’t. Pricing places the probabilities of a charge rise to 0.25% from the present 0.10% at 100%.

Turning to the GBP/USD chart, the primary essential help stage is the 1.3353 low touched on November 12, with trendline help at 1.3280. If these break, the pair will likely be again at ranges not seen since December 2020. Observe too that the 14-day relative energy index (RSI) on the backside of the chart under stays above the 30 oversold stage.

GBP/USD Worth Chart, Each day Timeframe (September 21, 2020 – November 23, 2021)

Latest GBP/USD price chart.

Supply: IG (You’ll be able to click on on it for a bigger picture)

UK PMIs larger than anticipated

Within the information, the November flash PMIs for the UK all got here in above the consensus forecasts of economists polled by the information businesses. The composite index was nonetheless down marginally from October however the manufacturing index really rose.


Source: DailyFX calendar

As for sentiment, IG consumer positioning knowledge for GBP/USD are additionally suggesting additional falls for GBP/USD. The retail dealer knowledge present 71.66% of merchants are net-long, with the ratio of merchants lengthy to quick at 2.53 to 1. The variety of merchants net-long is 7.68% larger than yesterday however 5.28% decrease than final week, whereas the variety of merchants net-short is 0.33% decrease than yesterday and 5.67% decrease than final week.

Right here at DailyFX, we usually take a contrarian view to crowd sentiment, and the actual fact merchants are net-long suggests GBP/USD costs might proceed to fall. Merchants are additional net-long than yesterday and final week, and the mix of present sentiment and up to date adjustments offers us a stronger GBP/USD-bearish contrarian buying and selling bias.

— Written by Martin Essex, Analyst

Be at liberty to contact me on Twitter @MartinSEssex

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