GBP/USD has been on quite roller coaster this summer and ride seems like it’ll continue.
GBP/USD has been on quite roller coaster this summer and ride seems like it’ll continue. in the week brings both the US Federal Reserve System and therefore the Bank of England rate of interest Decisions. additionally , a breakdown within the trade affect the EU in Brexit negotiations could add further volatility to the pair.
The US Federal Open Market Committee (FOMC) will meet on Wednesday to debate interest rates and stimulus within the current environment. Expectations are for the financial institution to go away the key rate of interest unchanged at 0.25%. The Fed has said recently that they’re going to leave interest rates low for years to assist support the economic recession while letting inflation run hot over time to hunt a mean inflation of twenty-two . Traders are going to be expecting clues on “how long” the Fed is willing to let inflation run hot, as there has been no mention of a timeframe. additionally , traders are going to be listening to the Summary of Economic Projections (the dot plot), as they’re going to include an outlook through 2023. The question traders are going to be asking is “Does that Fed think interest rates will rise in 2023?”
In addition to the US FOMC meeting, The Bank of England (BOE) will meet on Thursday to debate its own rate of interest policy. Expectations are for the BOE to go away rates unchanged at 0.1% while maintaining the dimensions of its bond buying program at 745 billion Pounds, which is predicted to be enough to last until the top of 2020. As MPC members have expressed concerns that the negative effects of the coronavirus might be worse than initially feared, traders are going to be watched to ascertain if the financial institution sets the table for more stimulus at the November meeting. additionally , some members have expressed the likelihood of taking rates negative, something that the ECB and BOJ have already done. Traders are going to be expecting clues to ascertain if the BOE is hospitable the likelihood of taking this step.
The BOE not only faces the task of handling the pitfalls of the coronavirus, but also those of the continued negotiations of Brexit. because the light gets dimmer and dimmer on the probabilities of a trade deal, the financial institution must also find out the way to navigate the results of a no-deal Brexit. Boris Johnson is threatening to depart from the Withdrawal Agreement and has introduced the interior Markets Bill, which lawmakers say would break law of nations . The bill’s main purpose is to clarify uncertainties regarding Northern Ireland (and to play chicken with the EU). The bill are going to be debated within the week in the House of Commons. The EU has threatened action if the united kingdom departs from the Withdrawal Agreement.
GBP/USD lost 3% last week. On a weekly timeframe, counting on how one draws the downward sloping trendline, price posted a false breakout above a descending wedge and is now trading just back within the wedge. the highest trendline of the wedge crosses near 1.2950.
On a daily timeframe, GBP/USD has been during a rising wedge formation since early June. The pair put during a meteor candlestick on September 1st near 1.3485, only to start trading lower throughout the month of September. The pair broke lower from the rising wedge (and back below the falling wedge top trendline on the weekly timeframe). So far, GBP/USD has held the 200 Day Moving Average near 1.2733 (first support) and therefore the 38.2% Fibonacci retracement level from the March 20th lows to the September 1st highs near 1.2691 (second support). First resistance above is that the previously mentioned weekly trendline and near 1.2970, then they September 10th highs near 1.3035.
Make sure to observe both the FOMC on Wednesday and therefore the BOE on Thursday. The more dovish financial institution should win the battle for the weaker currency. additionally , if things continue an equivalent path towards negotiations in Brexit, GBP/USD could continue lower. However, if the tide begins to vary in negotiations, GBP/USD can jump higher on any positive headlines.