Chart of The Day GBPUSD
GBPUSD Year Treasury Note Probable Price Path & Potential Reversal Zone
GBP: Bank of England Governor Andrew Bailey is also scheduled to give a Mansion House speech which will be published at 5pm. There is no mention on the BoE website on what the speech will be about. The Bank expects the economy to contract by about 4% this quarter, mainly as a result of the national lockdown, but a vaccine-fueled recovery is anticipated in the second half of the year. Backward-looking Q4 2020 GDP data will be released on Friday and are expected to show the economy growing by about 0.6%, which would be a marked slowdown from Q3, but remaining positive nonetheless despite the November lockdown in England.
USD: The equity risk rally came to a halt overnight after six days of gains despite signs of progress on Biden’s fiscal stimulus package and also hints from Fed’s Kaplan that they will allow a temporary inflation overshoot. Kaplan commented that “the temporary jump in inflation or rise won’t surprise me – the question for me will be how persistent is it”. The S&P 500 slipped 0.11% while VIX rose to 21.63. Cisco’s 3Q revenue forecast topped estimates while Twitter added fewer new users in 4Q. The USD softened again while UST bonds gained, pushing the 10-year yield back down to 1.16% amid a solid 3-year bond auction. There are the $41bn 10- year bond sale today and $27bn 30-year bond auction tomorrow. The 3- month LIBOR edged up to 0.2025%.
From a technical perspective the GBPUSD has made an impressive breach of the pivotal resistance at 1.3750, the upside extension has gained significant attention driven by the requisite short covering which such a move encourages. This break now offers some decent two way trading opportunities for short term players. On the topside it is certainly worth watching a potential confluence of resistance sited at 1.3875/1.3900 this area represents the 1.618 Fibonacci extension of the prior consolidation phase, along with monthly, weekly and daily projected range resistance as highlighted by the amber box on the chart. If bearish reversals patterns develop here this would offer an opportunity to play the counter trend short side for a snap back move to retest prior resistance as support at 1.3750. Bullish reversals patterns from this area would be an excellent opportunity to align with the dominant trend and target a test of the pivotal 1.40 level as highlighted in the chart.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!