GBPUSD Technical Analysis 23.03 - 30.03: Breakdown to Reversal
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newdigital, 2014.03.21 18:42
Forex Weekly Outlook Mar. 24-28The US dollar had a successful week, rising against most currencies thanks to a hawkish move from the Federal Reserve. German Ifo Business Climate, Inflation data in the UK, US consumer sentiment and housing data as well as jobless claims are the highlight events . Here is an outlook on the main market-movers this week.
- German Ifo Business Climate: Tuesday, 9:00. German business sentiment edged up in February to 111.3 from 110.6 in January. The release was better than the 110.7 predicted by analysts. The rise suggests that economic recovery is continuing to improve despite some weak figures in exports and industrial output. The survey shows retailers are more satisfied with current economic conditions and consumer spending is rising. A small decline to 110.9 is predicted this time.
- UK inflation data: Tuesday, 9:30. Inflation in the UK fell in January to 1.9% from 2.0% in the previous month due to lower tobacco prices. The rate declined below the Bank of England's 2% target for the first time in more than four years. In the first half of 2013 inflation nearly reached 3.0% but descended in the second half of the year. Prime minister David Cameron commented that this fall in inflation is further evidence that UK’s economic plan is working. Low inflation enables future planning without surprises. Another decline to 1.7% is anticipated now.
- US CB Consumer Confidence: Tuesday, 14:00. Americans were more pessimistic about the US economy in February according to the Conference Board survey. Consumer confidence declined to 78.1 from 79.4 in January, contrary to predictions for 80.2 points. The Expectations Index, fell to 75.7 points in February from 80.8 January's 80.8. Responders were concerned over the short-term outlook for business conditions, jobs, and earnings. Meanwhile, current conditions assessment has improved. Consumer confidence is expected to improve to 78.7.
- US New Home Sales: Tuesday, 14:00. New U.S. home acquisitions edged up to a 468,000 annualized pace in January, exceeding forecasts of a 406,000 reading. This five year high release was preceded by 427,000 in December, indicating the housing sector remains strong despite recent falls, even in the midst of unusually cold weather. If the job market continues to improve, the housing sector would return to solid growth. Home sales are expected to reach 447K this time.
- US Durable Goods Orders: Wednesday, 12:30. Orders for long-lasting U.S. goods excluding transportation unexpectedly climbed 1.1% in January following a 1.9% plunge in December, suggesting factory activity may yet improve despite recent falls. However, durable goods fell 1.0% in January after posting a 4.3% fall in the previous month. Nevertheless, the harsh weather conditions had a big role in the recent industrial decline. The manufacturing sector is expected to do better in the coming months. A small rise of 0.3% is anticipated this time.
- US Unemployment Claims: Thursday, 12:30. US jobless claims rose less than expected last week, increasing 5,000 to 320,000 Analysts expected claims to reach 327,000. The four-week moving average declined by 3,500 to 327,000. Continuing claims increased to 2,889,000, compared to a downwardly revised 2,848,000 recorded a week earlier. The better than expected release suggests the weak Non-farm payrolls release was a onetime event affected by the cold weather. Jobless claims are expected to reach 326,000.
- US Pending Home Sales: Thursday, 14:00. Contracts to buy existing U.S. homes edged up 0.1% in January after a 5.8 drop caused by unusual winter storms, harsh weather and limited inventory. This small scale rise was less than the 2.9 climb anticipated by analysts. Nevertheless, conditions are expected to improve in the coming months despite tight credit conditions. A further rose of 0.2% is expected now.
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newdigital, 2014.03.22 06:17
GBPUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for Pound: Bullish
- British Pound Holds Steady Following BOE Minutes
- British Pound Breakdown Seen Through GBP/AUD and GBP/USD
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newdigital, 2014.03.24 07:22
2013-03-24 01:45 GMT (or 02:45 MQ MT5 time) | [CNY - Flash Manufacturing PMI]
- past data is 48.5
- forecast data is 48.7
- actual data is 48.1 according to the latest press release
if actual > forecast = good for currency (for CNY in our case)
==========
China Manufacturing PMI Hits Eight-Month Low - HSBC
China's manufacturing sector fell deeper into contraction in March, the latest flash PMI from HSBC and Markit Economics revealed on Monday. The index came in with a seasonally adjusted score of 48.1, touching an eight-month low.
The headline figure is down from 48.5 in February, and it was well shy of forecasts for 48.7 - and it moves the index further below the mark of 50 that separates expansion from contraction.
Among the key components of the survey, the output index sank to 47.3 from 48.8 in the previous month - hitting an 18-month low.
Among other components, new orders, work backlogs, output prices, input prices and quantity of purchases all continued to contract at an accelerating rate.
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GBPUSD M5 : 10 pips price movement by CNY - Flash Manufacturing PMI news event
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newdigital, 2014.03.23 16:58
GBP/USD Fundamentals - weekly outlook: March 24 - 28The pound ended the week close to five-week lows against the dollar on Friday as growing expectations that the Federal Reserve could raise interest rates sooner than anticipated supported the dollar.
Monday, March 24
- The U.S. is to release preliminary data on manufacturing activity.
- The U.K. is to release data on consumer price inflation, which accounts for the majority of overall inflation. The nation is also to release private sector data on retail sales.
- Later Tuesday, the U.S. is to release report on house price inflation and consumer confidence, as well as official data on new home sales.
- The U.S. is to release data on durable goods orders, a leading indicator of production.
- The U.K. is to produce official data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
- The U.S. is to publish final data on fourth quarter economic growth. The nation is also to release the weekly report on initial jobless claims and private sector data on pending home sales.
- The U.K. is to release data on the current account and final data on fourth quarter growth.
- The U.S. is to round up the week with a report on personal spending and revised data on consumer sentiment.
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newdigital, 2014.03.24 19:52
Fundamental indicators explained (based on dailyfx article)
United Kingdom Consumer Price Index (YoY) (FEB)Inflation figures out of the U.K. remain key for price action in GBP crosses moving forward as the Bank of England continues to remain quiet as prices rise towards the 2.5% YoY level floated by Carney as possible ‘threshold’ for any rate increases. The savvy leader of the BoE (and former head of the Bank of Canada) has likely remained silent as to not further fuel speculations of rate increases sooner rather than later. Any further official speculation would add even more fundamental fuel to the GBP’s rise. Higher inflation figures reported on Tuesday would likely support the Sterling while those that meet or beat expectations may leave GBP crosses relatively unchanged as we have seen before.
JPY National Consumer Price Index (YoY) (FEB)Japanese data and even developments out of the Bank of Japan have failed to move Yen crosses over the last few weeks as some of the equity/yen correlations have broken down. Nevertheless, inflation data out of Japan gives key insight into whether the BoJ is on target with its goal of achieving 2% CPI by expanding its monetary base dramatically. If inflation expectations miss expectations, we will have to see comments from the BoJ eventually, even as the central bank remains relatively silent as the fiscal house attempts to get the sales tax and corporate tax changes in order. A failure to do so could lead to instability in Japanese confidence, but of course price action as of late continues to remain market sentiment in equity and bond markets.
EUR German Consumer Price Index (YoY) (MAR P)These preliminary figures for German inflation data will be closely watched by market participants, especially in the context of EUR/USD just below 1.40 and as Draghi of the European Central Bank remains almost overconfident in his assessments of EU prospects. If we see a miss here, it will add to fundamental pressure on the Euro and pressure as well on the ECB to eventually take some sort of action. On the other hand, if we do see developments out of Russia that include any hint of natural gas supply disruptions, disinflation worries would likely be something of the past as higher prices would help boost CPI levels. Nevertheless, this is the sort of inflation not welcomed by consumers or the ECB. Although equity markets continue to brush off worries of geopolitical tensions, those trading Euro and Yen crosses should not be complacent, especially as forex markets have proved to respond most logically to macro developments.
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newdigital, 2014.03.25 07:03
Fundamental indicators explained (based on dailyfx article)
- News events can help us decipher an economy’s strength
- GDP, CPI and Employment figures can change the demand of a currency
- Fundamental traders look to pair currencies from a strong economy to a weaker one
GDP
First we have the Gross Domestic Product (GDP). The GDP growth rate looks specifically at changes in growth patterns of an economy by tabulating household consumption, government spending, domestic investment’s, and net exports for a country. As growth increases it means an economy is expanding and can cause a high demand for a nation’s currency as that currency is needed to make new purchases. As well, a contraction or slowdown in growth can have the opposite effect.
Ultimately this growth (or lack of it) causes inflationary pressures in the market place. With central banks looking to potentially change monetary policy due to these results GDP announcements can become volatile events.
CPI
Next, we will look at the Consumer Price Index (CPI). CPI is another
economic indicator that is released on a monthly basis by most major
economies. It is designed to give a timely glimpse into current
inflation levels in an economy. Inflation tracked through CPI looks
specifically at purchasing power and the rise of prices of goods and
services. If prices are rising drastically this can be signs of growth
as well as rising inflation.
In most scenarios, if CPI is released lower than expected, normally this would influence Reserve Banksto consider stimulating the economy by opting for lower interest rates or commit to new open market operations to increase the money supply. Conversely a higher CPI reading suggests an inflating economy. This would give cause for increasing current interest rates and thus affect demand for a currency.
Employment Figures
Lastly fundamental traders should monitor employment figures to get a
bearing on the strength or weakness of an underlying economy. A booming
economy will offer many employment opportunities and drive down
unemployment figures. As business contracts, the opposite is true. As
unemployment rises, it can have a devastating effect on an underlying
economy.
While there are a variety of employment statistics that can be tracked
one of the most watched is the Non Farm Payroll (NFP) figure released in
the United States. This event shows new jobs added to the workforce
outside of the agricultural sector and shows the strength of the US
economy. As this number is released fundamental traders will watch for
opportunities to buy or sell currencies coupled with the dollar.
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newdigital, 2014.03.25 07:13
Trading the News: U.K. Consumer Price Index (based on dailyfx article)A further slowdown in U.K. inflation may generate a further decline in the GBP/USD as it limits the Bank of England’s (BoE) scope to normalize monetary policy sooner rather than later.
Why Is This Event Important:
Indeed, the upcoming shuffle in the Monetary Policy Committee (MPC) may spark a material shift in the policy outlook as the central bank continues to assess the underlying slack in the real economy, but it seems as though Governor Mark Carney will do little to halt the appreciation in the British Pound as it helps to balance the risks surrounding the region.
How To Trade This Event Risk
Bearish GBP Trade: U.K. CPI Narrows to 1.7% or Lower
- Need red, five-minute candle following the release to consider a short British Pound trade.
- If market reaction favors selling sterling, short GBP/USD with two separate positions.
- Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
- Move stop to entry on remaining position once initial target is hit, set reasonable limit.
- Need green, five-minute candle to favor a long GBP/USD trade.
- Implement same setup as the bearish British Pound trade, just in opposite direction.
GBP/USD Daily
- Watching 1.6400 for Lower High; Break Below Would Negative Bullish Bias.
- Bearish Relative Strength Index Highlights Downside Targets.
- Interim Resistance: 1.6850-60 (78.6% expansion).
- Interim Support: 1.6400 (61.8% expansion) to 1.6430 (23.6% expansion).
U.K. Consumer Prices grew an annualized 1.9% in January to mark the slowest pace of growth since November 2009, with the core rate of inflation narrowing to 1.6% from 1.7% the month prior. The initial reaction to the weaker-than-expected print was short-lived as the GBP/USD climbed back above the 1.6700 handle, but the sterling struggled to hold its ground during the North American trade as the pair closed at 1.6680.
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newdigital, 2014.03.25 10:43
2013-03-25 09:30 GMT (or 10:30 MQ MT5 time) | [GBP - CPI]- past data is -0.6%
- forecast data is 0.5%
- actual data is 0.5% according to the latest press release
if actual > forecast = good for currency (for GBP in our case)
==========
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GBPUSD M5 : 24 pips price movement by GBP - CPI news event
If D1 price will break 1.6479 support level on close bar together with Chinkou Span line of Ichimoku indicator to be crossed the price on close D1 bar from above to below so we may see good breakdown to bearish reversal (good to open sell trade for example).
If not so GBPUSD D1 price will be on ranging market condition floating between 1.6718 resistance and 1.6382 support levels.
- Recommendation for long: n/a
- Recommendation to go short: watch the price for breaking 1.6479 support level on close D1 bar for possible sell trade
- Trading Summary: possible reversal
Chinkou Span line crossed historical price on close D1 bar but on horizontal way this is indicating the flat. New support level was formed: 1.6465
Thus, the reversal was happened and it is primary bearish on D1 timeframe but with flat as the secondary trend.
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newdigital, 2014.03.25 20:41
Trading the News: U.S. Durable Goods Orders (based on dailyfx article)
- U.S. Durable Goods Orders to Increase for First Time Since November
- Non-Defense Capital Goods Orders to Rise for Second Straight Month
2013-03-26 12:30 GMT (or 13:30 MQ MT5 time) | [USD - Durable Goods Orders]
A 1.0% rebound in U.S. Durable Goods Orders may prompt a bullish reaction in the dollar as it raises the outlook for growth and inflation.
Why Is This Event Important:
Indeed, prospects for a stronger recovery may encourage the Federal Open Market Committee (FOMC)
to normalize policy sooner rather than later, and we may see Fed Chair
Janet Yellen continue to soften her dovish tone for monetary policy as a
growing number of central bank officials see a stronger recovery in
2014.
However, the slowdown in private sector credit paired with the pullback
in consumer confidence may generate a dismal release, and another
decline in U.S. Durable Goods Orders may trigger a selloff in the
greenback as it limits the Fed’s scope to remove the zero-interest rate
policy (ZIRP) later this year or in early 2015.
How To Trade This Event Risk
Bullish USD Trade: Demands Increase 1.0% or Greater
- Need to see red, five-minute candle following the release to consider a long dollar trade
- If market reaction favors a short EURUSD position, sell pair with two separate position
- Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
- Move stop to entry on remaining position once initial target is hit; set reasonable objective
- Need green, five-minute candle to favor a short dollar trade
- Implement same setup as the bullish USD trade, just in reverse
- At Risk for Larger Correction Following Higher High (1.3965); Higher Low on Tap?
- Interim Resistance: 1.3960-70 (61.8% expansion)
- Interim Support: 1.3600 Pivot to 1.3620 (23.6 retracement)
Demands for large-ticket items decline another 1.0% in January following
a revised 5.3% drop the month prior, while Non-Defense Capital Goods
Orders excluding Aircrafts, a proxy for business investments,
unexpectedly increased 1.7% amid forecasts for a 0.2% contraction.
Nevertheless, the initial reaction to the data print was short-lived,
with the EURUSD coming off of the 1.3650 region, and the reserve
currency continued to lose ground throughout the North American trade as
the pair closed at 1.3708.
2013-03-26 12:30 GMT (or 13:30 MQ MT5 time) | [USD - Durable Goods Orders]
GBPUSD M5 : 21 pips ranging movement by USD - Durable Goods Orders news event :
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D1 price was on secondary correction within primary bullish for whole the last week, and Chinkou Span line of Ichimoku indicator was crossed historical price from above to below on open D1 bar in the end of the week for possible good breakdown to bearish reversal.
W1 price is on correction as well, and the price on H4 timeframe is already in bearish market condition.
If D1 price will break 1.6479 support level on close bar together with Chinkou Span line of Ichimoku indicator to be crossed the price on close D1 bar from above to below so we may see good breakdown to bearish reversal (good to open sell trade for example).
If not so GBPUSD D1 price will be on ranging market condition floating between 1.6718 resistance and 1.6382 support levels.
UPCOMING EVENTS (high/medium impacted news events which may be affected on GBPUSD price movement for this coming week)
2013-03-24 01:45 GMT (or 02:45 MQ MT5 time) | [CNY - Flash Manufacturing PMI]
2013-03-24 13:45 GMT (or 14:45 MQ MT5 time) | [USD - Manufacturing PMI]
2013-03-25 02:00 GMT (or 03:00 MQ MT5 time) | [CNY - CB Leading Index]
2013-03-25 09:30 GMT (or 10:30 MQ MT5 time) | [GBP - CPI]
2013-03-25 11:00 GMT (or 12:00 MQ MT5 time) | [GBP - CBI Realized]
2013-03-25 14:00 GMT (or 15:00 MQ MT5 time) | [USD - Consumer Confidence]
2013-03-25 14:00 GMT (or 15:00 MQ MT5 time) | [USD - New Home Sales]
2013-03-26 12:30 GMT (or 13:30 MQ MT5 time) | [USD - Durable Goods Orders]
2013-03-27 09:30 GMT (or 10:30 MQ MT5 time) | [GBP - Retail Sales]
2013-03-27 12:30 GMT (or 13:30 MQ MT5 time) | [USD - GDP]
2013-03-27 14:00 GMT (or 15:00 MQ MT5 time) | [USD - Pending Home Sales]
2013-03-28 09:30 GMT (or 10:30 MQ MT5 time) | [GBP - Current Account]
2013-03-28 09:30 GMT (or 10:30 MQ MT5 time) | [GBP - GDP]
2013-03-28 12:30 GMT (or 13:30 MQ MT5 time) | [USD - PCE Price Index]
2013-03-28 13:55 GMT (or 14:55 MQ MT5 time) | [USD - Michigan Consumer Sentiment Index]
Please note : some US (and CNY) high/medium impacted news events (incl speeches) are also affected on GBPUSD price movement
SUMMARY : reversal
TREND : breakdown
Intraday Chart
