From the Technical Analysis (TA) standpoint,
the pound Sterling has entered an important zone of consolidation by reference
to its historical performance, as can be seen on the chart above. This zone has
provided strong support / resistance in the past and is intimately bound up
with the 200 period Exponential Moving Average (EMA) on the weekly chart.
On this occasion price has almost
reached the bottom of the zone. Therefore, if history is to be repeated (and
the attention of large number of Forex traders around the world to this pattern
increases the chances that it will) then we can expect at least a short-term
rebound from last week’s downward move.
Fundamental analysis would also point
to a period of bi-directional volatility. The US dollar has been on a
remarkable upsurge recently, which has the effect of depressing the GBPUSD
pair. However, the British economy is now on a strong footing and this can be
expected to provide an impetus in the opposite direction.
Bank
of England can impact this week
This coming Thursday sees the Bank of
England Monetary Policy Committee (MPC) interest rate decision and Asset
Purchase Facility announcement. These will provide the market with the rationale
for any move in Cable, as the pound is known, and could even precipitate a
change in direction.
Now that the referendum on Scottish
independence, so prominent in the market place just recently but now very much
yesterday’s news, is out of the way, the market will rely on decisions by the
BoE and any related commentary, especially as these might have any relevance to interest rates. One problem in the past has been a tendency for
the governor of the UK central bank, Mark Carney, to provide mixed signals in
this regard.
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