Market Analysis

GBP Gains On BoE Confidence

May 28, 2021

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The pound tended to win against the USD, as well as against the EUR and JPY, as BoE politician Vlieghe mentioned the possibility of the bank proceeding with a rate hike at the end of next year, or even earlier if the British economy rebounded more faster than expected. On the other hand, the USD has jumped against JPY as concerns in the country of the rising sun are high about the path of the pandemic, the pace of economic recovery and the summer Olympics, while Tokyo’s state of emergency may be extended. The common currency tended to weaken against USD, GBP and CHF as ECB’s De Cos’s claims suggesting the area’s inflationary pressures are temporary and Panetta’s comments that it may be too early for ECB to downgrade its QE program kept heavy tone and may have invited the bears. Overall, the USD remained relatively stable, giving other currencies the opportunity to grab the initiative, while market attention turned to the release of April inflation data and to the consumption tax. The rise in gold price seeds was paused as the USD remained relatively stable halting its weakening and U.S. yields tended to rise as characteristically the U.S. 10-year Treasury yield reached 1.62% yesterday. Oil prices have tended to rise as uncertainty about Iranian oil continues, while analysts tend to note that the OPEC + group may keep its plans to gradually mitigate its product reductions.

GBP / USD grew yesterday breaking the resistance line 1.4145 (S1) now supported. Despite the growth of cable, its overall sideways movement seems to have been preserved, which is why we maintain our bias in favor of its continuation. Note, however, that the RSI indicator below our 4-hour chart exceeds the reading of 50, which may imply that the bulls could have a slight advantage. If the pair finds new buy orders along its path, we may see it break the resistance line 1.4275 (R1) and target the resistance level 1.4390 (R2). Behind, if selling interest would show for cable; we may see the pair fall below the 1.4145 (S1) support line and target the 1.3990 (S2) level.

USD / JPY also grew, breaking the resistance line 109.25 (S1), now turned to support and continued to grow testing the resistance line 109.95 (R1). It should be noted that the main body of the pair’s price, remained between the resistance line of 109.95 (R1) and the support line of 108.35 (S2) and also USD / JPY stabilized just below the level of 109.95 (R1), we tend to maintain our bias for lateral movement as described above. For our side bias to shift in favor of a bullish outlook, we would require a clear break of the resistance line of 109.95 (R1). Please note that the RSI indicator below our 4-hour chart has slightly exceeded the reading of 70, which may imply that the pair is over-bought and may correct lower. If the bulls actually control the direction of the pair, we may see it break the resistance line 109.95 (R1) and target the level 110.90 (R2). If the bears take over, we may see the pair break the support line 109.25 (S1) and target the level 108.35 (S2).

Other economic highlights today and the next Asian session:

Today during the European session, we note the final GDP index of France for Q1, the CPI of France (normalized in the EU) for May, the Swiss KOF indicator for May, the GDP index of Sweden for Q1, and of the Eurozone the business climate, economic sentiment and end consumer. confidence indicators are all for May. In the U.S. session, we get the U.S. consumer rate and the growth rate of the PCE Core Price Index, both for April, as well as the final consumer sentiment from the U.S. University of Michigan for May, while oil traders may be more interested in the weekly week. Baker Hughes oil rig. During Monday’s Asian session we note the release of Japan’s preparatory growth rate for April, while Australian traders may be more interested in the release of China’s National Bureau of Statistics (NBS) PMI interpretations for May, with a special focus on manufacturing sector reading.

GBP / USD H4 Chart