With the upbeat emotions created by the Bank of England by giving a hint of an interest rate hike while the market was not at all expecting this to happen the GBP proved the world that it is still some gas left in it and we cannot underestimate the currency. The BOE statement had pushed the price of GBP up resulted in a new yearly high in the GBP/JPY, GBP/CHF and GBP/USD pairs by just ignoring the GDP and wage growth data. The market had witnessed a very bullish movement in the GBP after the speech by BOE policy maker Gert Vlieghe. One more very important event for GBP is the speech of BOE governor Carney on Monday which will direct the movement of the pound in the coming week.
We expect next week will be full of volatility as it is full of important events like UK Prime Minister Theresa May speech on Friday in Florence and the FOMC summary of economic projection on Wednesday. However, the market already had started to discount another no change in interest rates by FOMC that will keep the USD movement in check.
On the other hand the tension over the North Korea is not at all in a moot to get settled in near term as North Korea again tested a powerful missile which flew over the Japanese airs that is again a strong warning from North Korea at this action clearly stated the intentions of North Korea which is not a positive signal for the world.
Technical outlook of GBP/USD
After breaking the key psychological level of 1.3500 the GBP is clearly showed that now the bulls are in control of the market and with the increased expectation of rate hike we expect these positive sentiments will stay for long.
On the technical ground, the GBP/USD pair had crossed the key resistance level of 1.3500 after giving the breakout of the downwards trend line. The retracement levels are also showing a upbeat movement in the pair and the medium term moving averages are suggesting a crossover that can further push the price near to the levels of 1.4000 which is again a very strong resistance level and the support is falling near to the level of 1.3250 in medium term and we are expecting the pair to trade with bullish sentiments in coming future provided the USD will continue to give bearish movement.
Technical outlook of GBP/JPY
It is the pair which got benefitted the most by the combination of North Korea missile test and the GBP interest rate sentiments and that resulted in a massive gain of nearly 800 pips bullish movement in just one week.
GBP/JPY also had crossed the key resistance level of 148.50 and that breakout was very strong, we also noticed that after the North Korea missile launch news the pair had also crossed the psychological level of 150.00 that indicates a clear change in the market sentiments and it is indicating that the bullish will decide the movement of the pair in near term.
On the technical ground, the GBP/JPY pair had given a strong breakout of the ascending triangle in medium-term time frames which is also a very strong indication of a price shift in the movement. The next resistance is near the level of 160.00 and we can expect the pair to reach this level in near term provided the positive sentiments will stay in the market with supportive data.
Technical outlook of U.S. Dollar Index
The dual tightening measures the Fed is trying to implement is not at all working for them as the gap between the market sentiments and the Fed is continuously increasing. The Fed started to put its focus on balance sheet reduction to tightening the money supply in the market along with the interest rate hike. But that turns out to be negative for the U.S Dollar as when the Fed first started to talk about that in March 2017 and increased the rate the U.S Dollar just lost its ground and turned bearish.
The bearish trend the U.S. Dollar started is still intact and the current market is not at all giving a positive signal that it will revive from this level in near term and the increased tension between U.S. and North Korea is affecting the price action and the continues missile test by North Korea is not letting the market to recover. That mixture of negative events is expected to keep the U.S. Dollar negative in near future.
On the technical ground, the U.S. Dollar index is still trading the medium-term downtrend line. The U.S. Dollar index tried to cross the trend line by giving a bullish movement in the starting of the last week but it encountered the resistance near to the level of 92.50 and then again turned back to its bearish trend.
The near-term resistance is still the 92.50 levels and support is falling near to the levels of 90.00 which we expect that the dollar will test in near term as the negative scenario of the market is not at all giving room to Dollar to give any kind of bullish movement in near term.
However, the upcoming FOMC meeting going to held on 20th September next week will broadly decide the movement of the U.S. Dollar index and if the FOMC will able to bring some positive sentiments back in the market we can witness some positive movement in the market.
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