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Wednesday, September 29, 2021

GBP Collapses Despite Hawkish BOE Message

GBP Under PressureGBPUSD is now very close to testing the yearly lows following the sell off this week. The rise in USD has accompanied investor uncertainty over the current energy crisis and supply chain issues hitting the UK. Indeed, the sell of this week comes despite a hawkish shift at last week’s Bank of England meeting and hot on the heels of further hawkish comments from BOE governor Bailey this week.Hawkish Shift At BOE MeetingAt the September BOE meeting, the bank noted that the case for hiking rates has strengthened on the back of the recent surge in inflation (3.2% in August). While the majority of members viewed the spike as temporary, with inflation set to peak around 4% this year, the bank noted clear upside risks given the current backdrop. Indeed, two members voted for immediate tapering of the bank’s asset purchase program. While the BOE noted that uncertainties remain in the outlook, the uptick in inflation presents a clear issue which needs to be addressed.Rate Hike Pricing RisesOn the back of the BOE meeting, the UK rates market saw a sizeable shift, pricing a rate hike by February as a 90% probability, up from around 60% ahead of the meeting. Following that meeting, we then heard from BOE governor Bailey on Monday. Bailey told the audience at an event in London that "All of us believe that there will need to be some modest tightening of policy to be consistent with meeting the inflation target sustainably over the medium term." The reference here to a unanimous view on tightening is a clear hawkish signal.Uncertainty RemainsDespite the clear hawkish signal from the BOE, however, GBP remains under pressure heading into the middle of the week. The ongoing supply chain issues and energy crisis currently hitting the country are heavily detracting from the BOE’s message creating wide-spread uncertainty as to the near-term outlook for the UK heading into the winter months. However, the current crisis, if anything, appears likely to drive inflation even higher, sharpening the focus on BOE tightening by year end.Technical ViewsGBPUSDThe breakdown below the contracting triangle pattern and the 1.3570 level support is a strong, bearish technical development for the pair. With both RSI and MACD giving bearish signals here, there is room for the move to extend. Price is fast approaching the 1.3461 level support, a break of which will open the way for a test of 1.32 next.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/gbp-collapses-despite-hawkish-boe-message"
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The investment landscape is getting messy – what should you own now?

(John here – don’t forget to grab your ticket for our virtual Wealth Summit in November. Things are rather heating up in markets, as Dominic discusses below, so you couldn’t pick a better time to be in a room with a group of the world’s smartest financial experts covering all the topics that matter most – find out more here.)

It feels like the 1970s all over again: energy shortages, inflation – and I mean visible inflation in everyday goods, not just in house prices – supply chain issues, rising bond yields, volatile markets, social discontent...

We lowly investors peek out from our bunkers and observe that pretty much every problem is the making of some short-sighted policy up top, from money printing to a failure to process HGV licences.

But we also note that there is little we can do, beyond ranting at the neighbours. All we have is the ability to put our own houses in order.

So we go back under cover and take stock.

What can you own when everything is expensive?

How to navigate what is becoming an increasingly difficult investment landscape?

Gold. You’ve got to own some, but it’s gone down again. It was supposed to protect against money printing, but it hasn’t. Not for ten years, apart from a brief surge in 2020.

It’s the ultimate analogue asset in a world where all the value is digital. But you never know. You’ve got to have some.

Bitcoin. You’ve got to own some; its potential is too great not to. But it’s going down. And at current prices it’s hardly the value proposition it once was.

Tech. That’s where the growth is; the scalability of digital is something to behold. You’ve got to have some tech in your portfolio. But we say it again: at current prices?

In the correction of the last week, tech stocks sold off by a lot more than other sectors. It looks relatively weak. And what about the semiconductor shortage? That’s not going to help. Is it?

Bonds? Don’t understand them. It looks like a racket to me. Yields are too low. Only invest in rackets you understand.

The base rate is 0.1%. Inflation is 4.8%. They say it’s only transitory. But how do they know? I can even hear the “brrr” of the money printer from inside my bunker, and it’s insulated. Doesn’t a shortage of HGV drivers and panic fuel buying signal higher prices? I think they’re just saying it’s transitory so they don’t have to put rates up.

But the negative real yield is closing in on 5%. That’s quite something. As Charlie Morris of Fleet Street Letter fame observes, inflation expectations are currently at 4.5% over the next two years. I’m not sure it’s as transitory as they say it is.

No wonder bond yields, even in this racket of a market, are spiking.

Base metals. It strikes me that base metal prices are largely driven by Chinese demand. The real estate company Evergrande is bust. People are posting videos on social media of the Chinese knocking down buildings they recently built that nobody’s using.

There are 30 million unused homes, I read. Can you ship some of them over here? The under-40s sure could use them.

I’m not so sure about Chinese construction demand for the moment. There’s definitely a structural deficit in base metals – too many years of underinvestment in mining. But the sector’s not in what you’d call a bull market.

Energy? It looks good, you have to say it. A bull market is a bull market and oil is in a bull market. It’s up 55% this year. Oil had a great decade in the 1970s. It beat pretty much everything. We are oil bulls. Have been for a long time.

Brent touched $80 this week. It has pulled back a little. But there is still room for it to go a lot higher. Ten years ago $100 was kind of normal – it will be again.

But there is a lot of noise about the oil price. We don’t like it when things get noisy; it worries us. It means the bull market’s nearer the end than the beginning.

Uranium too has been good. Many of the miners have just had a 25% correction this past fortnight. Time to jump in? Not sure. Still feels too noisy. Long term yes, but short term it worries me. Maybe that’s the proverbial bull market wall of worry.

Maybe boring old UK value stocks are the place to be. Could do a lot worse. Though they are not exactly sexy.

Which leaves cash. At least you know where you are with cash. You know it’s going to lose 5%-10% of its purchasing power over the next year.

It’s no longer a safe-haven; it has become like a time-dated option. But when everything else feels so shaky, a mere 5%-10% loss seems like a relative win.

Too much money is sloshing about looking for stuff that’s cheap. And nothing is cheap, because there’s too much money sloshing about.

I was a wee nipper in the 1970s. I don’t really remember it, but my old man used to say how hard it was. You knew you had to put your money somewhere, but it was impossible to know where.

Sounds like today.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

from Moneyweek RSS Feed https://moneyweek.com/investments/investment-strategy/603911/the-investment-landscape-is-getting-messy-what-should-you
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USDJPY is approaching a pivot, potential for bounce | 29 Sept 2021

Type: Bullish BounceResistance: 112.418Support: 110.384Pivot: 110.975Preference:Price has been consolidating in a upwards channel. We foresee a potential target at our pivot at 110.975 in line with 88% Fibonacci extension towards our 1st resistance placed at 112.418 in line with 161.8% Fibonacci extension and parallel channel.Alternative Scenario:Alternatively, price may dip towards our 1st support at 110.394 in line with 61.8% Fibonacci extension.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/usdjpy-is-approaching-a-pivot-potential-for-bounce-or-29-sept-2021"
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USD Soaring Following Powell Inflation Warning

Inflation More of An Issue NowThe US Dollar traded up to its highest level since November 2020 today, despite a mixed set of comments from Fed chairman Powell overnight. Testifying at the Senate Banking Committee hearing, the Fed chairman told senators that inflation has now become a more pressing issue than it was earlier in the year. However, Powell added the caveat that while inflation is soaring, the labour market remains far off maximal levels. With this in mind, Powell warned that the test for lifting rates is higher than it as previously and sought to reassure that the Fed will continue with its bond purchases until the middle of next year, albeit with tapering along the way.Fed Turning More HawkishWhile the comments were not as decisively hawkish as USD bulls would have liked, the Fed’s message on inflation represents an important shift. With rising global concerns around the soaring energy prices and supply chain issues, inflationary fears have taken hold again over the last month. With this in mind, an increasing number of Fed policymakers have been voicing their support for tapering in the near term.Tapering Coming SoonAt the last FOMC meeting, the Fed chairman held off from giving a clear timing signal, instead saying that tapering would likely soon be warranted. However, the market has clearly set its sights on November as the likely date for a tapering announcement. This is a view shared by some within the Fed itself with Fed’s Bullard noting overnight that he believes the central bank will begin tapering in November. This comes just a day after Fed’s Williams noted that he believes “substantial further progress” has been made and view tapering as likely in the coming months.Keep An Eye on DataLooking ahead this week, the focus will now shift to the rest of Powell’s testimony as well incoming US data. Tomorrow sees the finalised quarterly GDP print, weekly unemployment claims as well as the Chicago PMI, while on Friday, we see the headline ISM manufacturing reading for the month. Given the lifting USD sentiment here, any data upside over the remainder of the week likely to fuel a further rally in USD.Technical ViewsDXYThe rally in the USD Index has seen price breaking out above the 93.44 level and the previous YTD highs. While above here, the current bull channel looks set to extend to the next target of 94.63. supported by bullish signals on both the MACD and RSI. To the downside, any break below the rising channel will see 91.83 as first support.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/usd-soaring-following-powell-inflation-warning"
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What do higher oil prices mean for investors?

Yesterday, oil prices (as measured by Brent crude) raced past $80 barrel for the first time in three years. It’s the latest commodity of many to surge in value. West Texas Intermediate – WTI, the US benchmark – also hit a two-month high, at just above $76 a barrel.

So what’s going on and what do oil’s gains mean for you?

Why are oil prices rising?

As Reed Blakemore, deputy director of the Atlantic Council’s Global Energy Centre, tells Al Jazeera, the current “drama” in the market is due to a “collision of three massive forces: the impact of prolonged demand uncertainty due to Covid-19 on supply-side management over the past year; the structural changes of a policy-driven transition to a net-zero world; and the reality that sufficient investment and development of oil and gas supplies is still crucial to market stability even amidst a global energy transition”.

In other words, producers have struggled to match supply and demand in the short term due to lockdowns; while in the longer run, politicians are trying to swap us all to non-fossil fuels without really considering that we might need the old, mucky ones for a bit longer.

Most obviously, oil demand has rebounded sharply after its total collapse last year. In April 2020, Brent fell as low around $20 a barrel (hardly surprising when the whole world was locked up), while WTI (on some contracts) even turned negative briefly.

But positive news on vaccines and recovering higher economic activity following the easing of restrictions has seen the oil market to roar back to life. Brent is now up around 70% since the start of the year alone, while WTI is up more than 50%.

Another short-term factor is that the oil market is still reeling from the impact of Hurricane Ida which badly affected US supply last month. The fact that natural gas has gone through the roof is also having something of a knock-on effect to oil.

On top of all that, China specifically is enduring an energy shortage which is helping to underpin oil prices as it looks to cut down on pollution from coal in particular ahead of February, when it is due to host the Winter Olympics. As a result, many factories are switching to using diesel as an energy substitute.

Will oil prices remain this high?

In terms of supply, oil cartel Opec (plus Russia – known as Opec+) has just increased production. But oil prices have so far shrugged this off simply because it only matched increased demand – and as Goldman Sachs analysts point out, the impact of Hurricane Ida, which shuttered production capacity, offset the rise in oil production.

That’s likely to continue, even if supply is boosted further, reckons Barclays. "Opec+ tapering would not plug the oil supply gap through at least Q1 2022 as demand recovery is likely to continue to outpace this, due partly to limited capacity of some producers in the group to ramp up output".

Goldman Sachs now expects oil prices to level out around $90 a barrel by the end of the year, up from a previous estimate of $80. "While we have long held a bullish oil view, the current global supply-demand deficit is larger than we expected, with the recovery in global demand from the Delta impact even faster than our above-consensus forecast and with global supply remaining short of our below consensus forecasts'.

Of course, investment banks are constantly making forecasts about the oil price, and these are often wrong – notably, eye-catching calls that predict a price well in advance of current prices have tended to signal tops in the past. But a forecast for $90 isn’t so exuberant as to fit into that category. And even if prices don’t rise much further, there is no obvious reason to expect oil to crash either.

What does it mean for markets and the economy?

Higher oil spells higher petrol prices for consumers. And oil is of course a huge cost for companies too. So this could both spur inflation (which is already at a nine-year high) and hit disposable incomes (unless wages rise faster than prices – in which case corporate margins may well take a hit). In other words, this adds to the stagflation risks.

As far as investing goes, the winners are pretty obvious. Oil and gas companies should do well if prices stay high. One way to play this is via the iShares Oil & Gas Exploration & Production UCITS ETF (LSE: SPOG). which has risen sharply from its pandemic low, but is still trading below its pre-pandemic levels.

from Moneyweek RSS Feed https://moneyweek.com/investments/commodities/energy/oil/603908/what-do-higher-oil-prices-mean-for-investors
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Investment Bank Outlook 29-09-2021

CitiEuropean OpenAsian equities traded in the red, with USD retaining its strength from the NY session. Quarter-end and month-end distortions are playing a part, as well as the broader backdrop of the approaching US Fiscal deadlines. Closely watched Fedtalk yesterday did not yield any surprises, with speakers sticking to the script. Oil continued to fall in the Asian session following a report by the American Petroleum Institute pointing to a build in stockpilesLooking ahead, we look forward to the JPY LDP elections, which we do not expect to move markets. The first vote results have been released, with Kishida and Kono to have final battle. The results of the subsequent runoff is likely to be released around 08:40 BST. We also see a THB rate decision (08:05 BST) in which Citi Economics expects a close call, but predicts no rate cut with a 60% probability. Major data prints are light outside of a EUR economic confidence release (10:00 BST), which is not expected to move markets. Later in the day, we flag a host of central bank speakers from the G10 set to debut in the ECB’s forum (13:00-16:45 BST).Credit AgricoleAsia overnight Further rises in UST yields and concerns about inflation and even stagflation weighed on investor sentiment in the Asian session. The approach of another interest payment on Evergrande’s debt is also weighing on sentiment. Fed Chair Jerome Powell indicated that only decent jobs growth is needed next week to trigger the Fed’s tapering of its asset purchases in November. Scenes of queues for basic necessities in the UK and newswire reports of electricity rationing in some provinces in China, have raised concerns about stagflation. Evergrande is selling a stake in a regional bank to free up cash flow.While most Asian bourses were trading in the red at the time of writing, S&P 500 futures were trading in the green. G10 FX was trading in tight ranges. Rising Covid infections in NZ led to a short squeeze in AUD/NZD. So, the AUD was the outperformer during the Asian session and the NZD the underperformer. In Japan, the LDP Presidential election will go to a second round of voting between the two lead candidates, Taro Kono and Fumio Kishida. Both candidates failed to garner a majority of votes in the first round. The JPY has been steady during the vote.CIBCFX FlowsIn terms of currencies, risk sentiment was somehow dictated by the e-minis. Initial move up and AUDUSD rose to 0.7250, USDCAD slipped to 1.2670. All reversed when equity futures pared gains. For rest of the morning, it was all the same pattern. One thing we realised this morning was the strange demand for AUDNZD during the risk-on part. The cross was bought, heard on long-term strategic account bought a round this morning. But yield spreads of the 2-year AU-NZ bonds remained wide. Our trader Jon said expectations of RBNZ waned and this is causing bit of profit taking from across.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/investment-bank-outlook-29-09-2021"
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Myanmar's junta powerless as currency drops 60% in four weeks, economy tanks

from Forex News https://www.investing.com/news/forex-news/myanmars-junta-powerless-as-currency-drops-60-in-four-weeks-economy-tanks-2629335
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Dollar Edges Lower; Remains Elevated on Higher Yields

from Forex News https://www.investing.com/news/forex-news/dollar-edges-lower-remains-elevated-on-higher-yields-2629318
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Exclusive: China's regulators tighten scrutiny of FX dealers - sources

from Forex News https://www.investing.com/news/forex-news/exclusive-chinas-regulators-tighten-scrutiny-of-fx-dealers--sources-2629314
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Daily Market Outlook, September 29th, 2021

Daily Market Outlook, September 29th, 2021 Overnight Headlines Key House Panel To Advance Debt Limit Extension Bill On Wed. Japan's GPIF To Avoid Yuan-Denominated Chinese Sovereign Bonds Australia To End Emergency Support Payments As Vaccinations Rise N. Korea Says It Tested New Type Of Hypersonic Glide Vehicle US Dollar Stands Tall As Trade Price In Tapering And Rate Hikes Global Bond Market Set For Worst Month Since Early 2021 Oil Sinks As Climb In U.S. Stockpiles, Risk-Off Mood Check Rally Japan Leads Fall In Asian Equities As Inflation Fears Rattle Markets Evergrande Losing Control Of Bank Unit In $1.5 Billion Deal Samsung Elec Close To Finalising $17Bln Chip Plant In Texas iPhone Delivery Times Lengthen As Covid Hits Suppliers In Vietnam Micron Slides After Memory-Chip Maker Delivers Weak Forecast The Day Ahead Today’s highlight is probably the appearance of the US, Eurozone, Japanese and UK central bank heads at an ECB event from 4.45pm. While the predominant view remains that price pressures will ease back next year as economies adjust to current supply-side issues such as raw material and staff shortages, they will be mindful of risks that inflation stays elevated for longer. That latter concern may be greater in the US where CPI inflation remains above 5% and in the UK which the BoE predicts could have an extended period of inflation above 4% (into Q2 2022). In contrast, both the ECB and the Bank of Japan appear more confident about the transitory inflation narrative, perhaps because their economies had struggled to get inflation sufficiently high before the pandemic. Data wise, there will be some focus on the BoE August lending data, including the number of mortgage approvals. Tomorrow 7am sees an update of UK Q2 GDP which is expected to be unrevised at 4.8%q/q. Latest PMIs, however, reaffirm the likelihood of softer growth heading into H2, partly reflecting the impact of supply constraints. The Lloyds Business Barometer for September will be released overnight, and it will be interesting to see if sentiment tracks the PMIs lower. Global investors will pay attention to the Chinese September PMIs, also due overnight. Economic activity has been weighed down by measures to tackle the delta variant. The crisis in China Evergrande Group continues to be a focus for markets, as authorities move to limit financial market and wider economic contagion.G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby) USDJPY - 111.00 558m. 110.40/50 436m. 109.90/110.00 1.38bn (820m C). EURUSD - 1.1930 1.86bn (1.59bn C). 1.1860 532m. 1.1810/20 499m. 1.1790/1.1800 539m. 1.1740/50 1.36bn (787m C). 1.1700 1.06bn (899m P). 1.1650/70 512m. 1.1600/10 537m. 1.1490 660m. GBPUSD - 1.3670/80 1.10bn (868m C). USDCAD - 1.2950 630m. 1.2900 2.18bn (2.15bn C). 1.2800 480m. 1.2740/50 635m. 1.2630/40 539m. 1.2610/20 1.61bn (1.28bn P). USDCHF - 0.9320 800m. 0.9120 800m. USDTRY - 10.00 404m. USDMXN - 20.45 750m. 20.25 670m. USDCNH - 6.56 601m. 6.49 761m. 6.47 1.46bn (923m C). 6.45 559m. 6.44 1.21bn (1.16bn P)Technical & Trade ViewsEURUSD Bias: Bearish below 1.19 Bullish above Consolidates above key support in quiet Asia EUR/USD opened -0.1% at 1.1683 after falling as low as 1.1668 on higher US yields... In a very quiet Asian session the EUR/USD traded in a 1.1678/89 range Heading into the afternoon it was unchanged at 1.1680/85 Key support is at the 2021 low at 1.1664 after it held again yesterday A break below 1.1660 initially targets 1.1600/15 window Resistance is at the 10-day MA at 1.1715 and break eases pressure EUR/USD at risk while US yields firm and Fed expectations remain hawkishGBPUSD Bias: Bearish below 1.39 Bullish above. GBP options send warning signals GBP/USD option premiums shot higher as GBP/USD fell through major levels Erasing big 1.3550 barriers fuelled the rise, more so if 1.35 barriers go Benchmark 1-month implied volatility 5.9 to 7.0 since last week, holds firm 7.25 is July 20 peak and has held on multiple occasions since April 1-month 25D risk reversals demand 0.6 premium for GBP puts over calls That's their highest downside premium since March More premium gains would signal more worries of volatility and GBP lossesUSDJPY Bias: Bullish above 109 Bearish below USD/JPY to 111.68 before easing back, crosses mostly soft USD/JPY up to fresh high of year of 111.68 EBS into Tokyo fix, eases later Low limited to 111.35 however, ease alongside with US yields Yield on US Treasury 10s off from 1.560% early to 1.525%, now @1.532% Triple, maybe quadruple top between 111.65-70 now - today, o/n, July 1-2 Specs seen locking in profits on longs up early uptick, exporters quieter Japanese players in general hunkering down for H1 end tom, LDP vote today JPY crosses mostly soft with risk off, Nikkei -2.5% @29,442 today pre-H1 end EUR/JPY 130.46 to 130.15 EBS, GBP/JPY 150.77-151.19 after plunge o/n AUD/JPY 80.58-89, NZD/JPY 77.30-65, CAD/JPY more buoyant, 87.70-88.10AUDUSD Bias: Bearish below 0.75 Bullish above Steady around 0.7245 as bounce in E – minis underpins AUD/USD opened -0.63% at 0.7240 after USD strengthened and Wall Street fell It moved up to 0.7250 early Asia before coming under pressure again The low was 0.7227 before a 0.5% move up in E-minis steadied risk assets Heading into the afternoon the AUD/USD is steady around 0.7245 Support is at 0.7220/25 where it has bottomed over past 2 weeks More support is at the 76.4 of the 0.7106/0.7477 move at 0.7194 Rise in risk aversion and increased downside risks weighing on AUD Bias is for lower while resistance at 0.7320/25 caps rallies

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/daily-market-outlook-september-29th-2021"
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BTCUSD bearish momentum | 29th Sep 2021

Support: 39505.75Resistance: 44133. 89Pivot: 42138.05TypeBearish DropPreference:Price is reacting in a descending channel, we can expect price to drop further from pivot in line with 61.8% Fibonacci retracement towards the 1st Support in line with 100% Fibonacci projection and -27.2% Fibonacci extension.Alternative Scenario:Alternatively, price can reverse back up to 1st Resistance in line with 78.6% Fibonacci retracement and 61.8% Fibonacci projection.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/btcusd-bearish-momentum-or-29th-sep-2021"
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Market Update – September 29 – Asias shares set their Worst Quarter

Market News

The surge in Treasury rates was a major catalyst behind the steep drop on Wall Street, though the looming debt limit and potential potential government shutdown on October 1, and more importantly the threat of default, weighed heavily on US assets.
China’s power crunch worsens.
Yields stabilised (30-year closed to 2.10% and the 10-year hitting 1.565% before dipping late in the session as some dip buyers stepped forward).
MSCI’s gauge of Asian stocks saw the biggest drop in almost six weeks and is set for the first quarterly slide in six. – Evergrande concerns resurfaced as China stepped in to buy a stake in a regional bank from the developer. Hong Kong’s central bank has reportedly asked lenders to report their exposure to the Group and Fitch Ratings downgraded the developer’s rating to C from CC.
Testimony from Fed Chair Powell and Treasury Secretary Yellen did not do the markets any favors either but added to the overall uncertainties emanating from Capitol Hill.
Equities extended losses in Japan, JPN225 down -2.6%. USA500 was off -2.0% at 4355, USA100 paced the plunge in the indexes, tumbling -2.8%, below 15,000. USA30 was -1.6% lower.
USOil dropped back below the $74 mark, after reaching a high of 74.87.
FX markets – GBP selling off sharply yesterday but steadied so far today– USD corrected – USDJPY – 110.33, Cable 1.3527, EURUSD 1.1677.

European Open – Some stabilisation then for the beleaguered bond market and stocks are also showing signs of life, with GER30 and UK100 futures posting gains of 0.4% and 0.2% respectively, while US futures are up around 0.6%.

After the sharp sell off in equity markets in recent days, dip buyers would emerge eventually – Will calm in bond markets last for long? even if central bank officials will do their best to calm nerves this week.

Unless China risk escalates and spills over monetary policy support is set to be phased out gradually over the next years and stocks will have to adjust to the changed outlook.

Today – Data releases today include UK lending data and Eurozone ESI economic confidence and there are also a number of speakers at the ECB’s conference on central bankers. Pending Home Sales from US also on tap.

Asset of Interest Cotton (+6.53%) Broke 101 barrier, posting fresh record high, extending rally for 8 day’s in a row breaking the upper daily BB line. Daily RSI at 73 while MACD line extended above 0 suggesting the increase of positive bias.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

from HF Analysis /274013/
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GBPUSD – Will it rebound from yesterday’s heavy fall?

GBPUSD, H4

Yesterday, the GBPUSD pair fell throughout the European and US trading sessions, falling more than 160 pips from the 1.3696 opening price to close at 1.3529, marking a new low of the last 12 months. After bond yields continued to rise from the week before, the 10-yr hit a multi-month high of 1.55% (now 1.52%), causing the stock market to collapse, with the USA100 the worst performer losing -2.83% for its worst day since March 2020. The US Dollar was at its highest in 10 months, with the USDIndex hitting a new high of 93.80.

Fed Chair Powell reiterated in a statement to the Senate that as the economy continues to reopen and spending begins to recover, price pressure is expected to increase. The impact of supply chain bottlenecks in some sectors will be larger and longer than expected and Inflation is expected to fall back to the 2 percent target over the long term. However, the Fed will do whatever it takes to sustain an economic recovery.

On the British side, yesterday the FTSE 100 fell -0.5% on concerns about Chinese property developers and interest rate hikes. On Monday, BoE Governor Bailey said the fastest rate hike could happen this year, although the bond purchase plan has not yet ended.

Yesterday’s heavy drop resulted in GBPUSD retracing above 1.3500, which is now trading at 1.3544, testing the lower band of the Channel. It has key support at 1.3500, while the RSI’s overbought rebound target, including bullish divergence, will be at 1.3600.

Today’s economic calendar includes keynote speeches by both Fed Chairman Powell and BoE Governor Bailey, as well as the weekly report on US home sales figures.