(Brad Alexander – FX Large Limited)
Did you see this great trade on GBPUSD?
I’m Brad Alexander and in this week’s Market Blast Fundamentals let’s take a look at Natural Gas (NatGas), Gold (XAUUSD), USD Index, and GBPUSD.
Last week’s US Federal Reserve Meeting sent the USD lower with the fears of a recession still in the minds of investors.
The USD Index is falling and we will look at this from the technical side tomorrow.
This gave us a wonderful Counter-Trend trading opportunity on a few pairs but let’s look specifically at GBPUSD.
Price action on GBPUSD had been in a clear uptrend for the last half of July.
The higher lows and higher highs were obvious.
As good traders, we always want to trade with the trend. The Trend is your Friend!
The remarks made in the FOMC press conference weakened the USD driving price action higher.
If you were already long on GBPUSD…nice one!
Good US Personal Consumption Expenditures (PCE) data drove price action lower, until it intersected with the lower trend line, giving us the perfect entry point to go long on GBPUSD.
As an added confirmation, the Stochastic Oscillator turned from Oversold at exactly the correct point.
This was the classic Counter-Trend trade and I highly suggest you look for more of these based around news events like the Australian and UK Interest Rate Decisions and of course the monthly US Non-Farm Payroll report.
The weaker USD has affected price action on Gold which has also risen based on uncertainty around Russian gas exports and tensions around Taiwan.
Speaking of Natural Gas, prices have actually fallen as major economies like Germany are legislating lower usage and price action has opened with a gap this morning.
CFDs and FX are leveraged products and your capital may be at risk.
GBPUSD Forecast: Pound looks to stretch higher above 1.2250
(Eren Sengezer – FXStreet)
– GBP/USD has managed to build on last week’s gains early Monday.
– Next technical resistance seems to have formed at 1.2250.
– The dollar stays on the back foot ahead of PMI data.
GBP/USD has preserved its bullish momentum and climbed above 1.2200 after having gained more than 150 pips last week. The pair remains on track to test 1.2250 and a four-hour close above that level could open the door for additional gains.
Despite the hot inflation data from the US on Friday, the CME Group FedWatch Tool shows that markets are pricing in a 30% probability of a 75 basis points (bps) Fed rate hike in September. On the other hand, the market positioning shows that the Bank of England (BoE) is now widely expected to raise its key rate by 50 bps on Thursday. Hawkish BOE bets and the Fed’s cautious stance seem to be helping GBP/USD edge higher but it’s too early to say that the policy gap has started to narrow.
Earlier in the day, the data from the UK showed that the S&P Global Manufacturing PMI fell to 52.1 in July (final) from 52.8 in June. Commenting on the survey’s findings, “with the Bank of England implementing further interest rate hikes to combat inflation, the outlook is beset with downside risks,” said Rob Dobson, Director at S&P Global Market Intelligence. “With this in mind, the continued low degree of optimism among manufacturers is of little surprise.”
The US economic docket will feature the ISM Manufacturing PMI data for July. The market consensus points to a decline in headline PMI to 52 from 53 in June. Investors will pay close attention to the Prices Paid and Employment components as well. In case the odds of a 75 bps Fed hike in September continue to decline on soft inflation and employment figures in the survey, GBP/USD could extend its recovery and vice versa.
GBPUSD Technical Analysis
GBP/USD closes in on 1.2250 (static level, July 29 high). With a four-hour close above that level, the pair could target 1.2300 (psychological level) and 1.2320 (the beginning point of the latest downtrend). On the other hand, supports are located at 1.2200 (psychological level, 1.2150 (20-period SMA on the four-hour chart) and 1.2125 (Fibonacci 61.8% retracement of the latest downtrend).
In the meantime, the Relative Strength Index (RSI) indicator on the four-hour chart stays below 70, suggesting that the pair has more room on the upside before turning technically overbought.