30 December, 2015
Over the past 5 days, the British Pound Sterling (GBP) has been under-performing against the major pairs, as the negative impact of the United Kingdom’s Q3 growth rate downward revision to 0.4% from 0.5% is seen as the reason for the most resent sell-off of the GBP.
The AUD has started to strengthen across the board over the last 5 trading sessions because the domestic economy has shown promising signs of improvement, despite weak commodity prices and a drop in the Chinese Yuan.
As we move closer towards the end of 2015, the USD is little changed over the last 5 day period, as the latest US economic data has had no change on the view about the direction of the U.S. economy. The U.S. economy remains healthy and this view is supported by the fact that the personal spending m/m rose by 0.3. We have also seen the Michigan consumer sentiment revised up to 92.6.
Traders are seen to be slowly moving into safe haven currencies as the year end approaches, however if the U.S. economic data remains relatively positive, then markets would expect the U.S. Fed to remain on path of gradual rate hikes in 2016 which will further support USD buying interest for some time to come.
GBPJPY continues in a downtrend from its November high near 188.80; price is below the downward sloping valid trend line, resistance is spotted at 182.10 and the next relevant support is near the 2015 lows (175.50). Stochastic analysis remains towards the downside and moving average analysis also supports my opinion that the GBPJPY should continue its downward course.
Fundamentally, the GBP does not have any real reasons to strengthen as the U.K. Q3 GDP growth rate has been adjusted downwards and the BoE will hold off on any rate hike for some time. Meanwhile, the JPY has some reason to gather some strength against the GBP, since Japan’s economy is expected to continue recovering moderately, according to the Bank Of Japan. Exports are expected to increase moderately as emerging economies move out of their deceleration phase. Business fixed investment is projected to continue increasing moderately and private Consumption is expected to remain resilient. Housing investment is projected to continue picking up. Industrial Production is likely to remain more or less flat for the time being.
My trading view for the GBPJPY is to sell the GBPJPY into strength for a target area at 175.50 zone.
GBPUSD, Daily (Updated)
GBP has recouped to the mid-1.48s after posting a seven-month low at 1.4785 yesterday. Yesterday’s decline marked a resumption of the GBP bear market as markets adjusted to a more dovish than expected tone in the minutes to the early December BoE monetary policy meeting. There is no market impact, UK data or events of note until the New Year. Things will kick-off on January 4, when the December version of the Markit manufacturing PMI survey will be released, along with the BoE’s monthly report on lending activity.
A technically price bounce is now under way with prices possibly to bounce towards the 1.5100 (sell zone), ahead of an additional decline towards the 1.4720 area (161.8 fibonacci extension level based on the 4-hour chart).
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