The GBP/USD fell to long term lows yesterday, but the trading occurred as a bank holiday was being celebrated in Britain.

The GBP/USD is trading near the 1.17180 mark as of this writing.  For traders who turned their head’s away yesterday and didn’t pay attention, the GBP/USD currency pair fell to a low of nearly 1.16480, thus today’s higher trading value may be considered a potential bright spot. But before traders are tempted to believe the worst is over for the British Pound, they might want to consider the following.

The notion that Great Britain was celebrating its ‘end of summer’ holiday yesterday and banks were officially closed meant that British institutions weren’t actively trading.  The notion that an ‘unprotected’ British Pound was left to the sentiment of international trading houses and sold off with a rather large amount of gusto is troubling. It could be a sign that behavioral sentiment globally views the GBP/USD as still being too highly valued.

GBP/USD Bullish Traders may believe the Forex pair is oversold but should be careful

The last time the GBP/USD traded at yesterday’s lows was during the height of coronavirus fear when the Forex pair went to within sight of the 1.14225 ratio momentarily in March of 2020. Yes, this time is different than the coronavirus experience, but the question if it is a better economic circumstance should be asked. Economic outlooks and central bank interest rate policies remain troubling for Great Britain and its global counterparts. The fact the U.S Fed seems intent on maintaining a hawkish interest rate policy is playing havoc with the GBP/USD too.

• The 1.17000 level should be watched closely, if it falters again short term, this could be a bearish signal.
• Later this week jobs data from the U.S is certain to create more volatility for the GBP/USD, and financial institutions may be positioning now for the statistics that will come on Friday.

Current Support Levels should be monitored for Additional Signals from the GBP/USD

If the 1.17000 were to prove vulnerable again and trading is sustained below this ratio, it would be a troubling signal for the GBP/USD. Yesterday’s move towards extreme lows may not be repeated short term, but it is a reminder that sentiment remains fragile. If current support begins to falter, traders could not be blamed for wagering on marks below the 1.17000 that target 1.16900 for quick hitting results if they are willing to bet on downside price action. Conditions will likely remain choppy in the GBP/USD and its bearish trajectory shows few signs of relenting in the near term.

GBP/USD Short Term Outlook:

Current Resistance: 1.17239

Current Support: 1.17010

High Target: 1.17580

Low Target: 1.16510

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Today’s recommendation on the lira against the dollar

• Risk 0.50%.
• None of the buy or sell transactions of yesterday were activated

Best selling entry points

Entering a short position with a pending order from levels of 18.33

• Set a stop-loss point to close the lowest support levels at 18.55.
• Move the stop loss to the entry area and continue to profit as the price moves by 50 pips.
• Close half of the contracts with a profit equal to 55 pips and leave the rest of the contracts until the strong resistance levels at 17.70.

Best buy entry points

Entering a long position with a pending order from 17.98 levels

• The best points for setting stop-loss are closing the highest levels of 17.74.
• Move the stop loss to the entry area and continue to profit as the price moves by 50 pips.

Close half of the contracts with a profit equal to 55 pips and leave the rest of the contracts until the support levels 18.31

Analysis of the Turkish lira

The USD/TRY stabilized against the dollar at its lowest level during the current year, near the highest level for the pair recorded during the past year. This is after the Turkish Central Bank surprised the markets and cut the interest rate last Thursday by 100 basis points or 1 percent. The stimulus policy pursued by the Turkish Central Bank is one of the biggest reasons that put pressure on the price of the lira, which is slowly declining against the dollar. During the day, the Turkish President will meet with the Council of Ministers to study the market’s reaction to the interest rate cut in conjunction with the expansion of inflation. Meanwhile, investors followed up on what could be called tensions at the political level after the United States accused Turkey of helping Russia evade some sanctions. In this regard, US Deputy Treasury Secretary Wali Ademo said on Saturday that Moscow is trying to use Turkey’s willingness to help resolve the crisis in Ukraine to bypass Western sanctions. During the call between the Treasury Secretary and Turkish Deputy Finance Minister Yunus Ilyas, Ankara emphasized that it would not allow Russia to violate the sanctions imposed by Western countries due to its invasion of Ukraine. Political tensions may represent one of the reasons for putting pressure on the price of the lira, which has no hope of rising in light of the current political and economic conditions.

Technical Outlook

The US dollar against the Turkish lira settled at its highest level during 2022, after breaking the narrow trading range in which the pair has settled since the beginning of the month, which is shown on the chart. The pair traded the highest support levels, which are concentrated at 17.98 and 17.85, respectively. While the lira is trading below the resistance levels at 18.16 and 18.33, respectively. The pair is also trading above the 50, 100 and 200 moving averages, on the four-hour time frame as well as on the 60-minute time frame, indicating the long-term bullish trend. The chance of the lira rising against the dollar is still slim as the pair is heading in an overall bullish trend. As each decline of the pair represents a good buying opportunity, please adhere to the numbers in the recommendation, with the need to maintain capital management.

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Gold prices continued to rise, to continue its gains for the fifth consecutive session. The price of gold moved towards the resistance level of 1982 dollars an ounce, the highest for the yellow metal in a month. Gold gains came as concerns about inflation and the ongoing war in Ukraine continued to urge investors to search for a safe haven commodity. The weak US dollar and lower Treasury yields also supported the rise of gold. The yield on the US 10-year Treasury bonds fell from the highest closing level in three years, which was recorded on Monday. The US dollar index slipped to 99.83, losing nearly 0.5% from the previous close, after jumping as high as 100.52 in the Asian session.

On the economic side, data from the Labor Department said that the US producer price index for final demand rose 1.4% in March after advancing by an upwardly revised 0.9% in February. Economists had expected producer prices to jump 1.1%, compared to a 0.8% increase originally recorded from the previous month. Energy prices led the way up, jumping 5.7% during the month, while food prices also rose 2.4%.

With the larger-than-expected monthly increase, the annual rate of producer price growth accelerated to a record high of 11.2% in March from 10.3% in February.

Elsewhere, the Office for National Statistics said consumer price inflation in Britain rose to 7% in March from 6.2% in February. The rate was expected to rise to 6.7%. It was the highest annual inflation rate in the national statistics series, which began in January 1997. It was also the highest in the model historical series since March 1992, when it reached 7.1%.

Technology stocks led gains in the US stock market, with bond traders cutting aggressive bets on the Federal Reserve’s rate hikes amid speculation that inflation may approach a peak. Investors also weighed the start of earnings season against geopolitical risks.

The S&P 500 halted its decline for three days, while the high-tech Nasdaq 100 outperformed. Another drop in two-year Treasury yields, which are more sensitive to impending monetary policy decisions – led to a decline this week to about 15 basis points. The Canadian dollar rose after the Bank of Canada raised its interest rate by half a percentage point in its largest increase in more than two decades. Oil traded above the $100 per barrel mark.

Bond yields fell even after the prices paid to US producers jumped by the most ever, topping all estimates. This contrasts with the recent consumer price report, which showed a deceleration in the pace of core inflation. For analysts, the large moves across the front-end of the Treasury market reflect diluted bets on the extent to which the Fed will tighten policy in the current business cycle.

Traders have also been keeping an eye on recent geopolitical developments, with President Joe Biden saying the United States will expand the size and range of weapons it provides to Ukraine in a new $800 million package of military aid. This includes heavy artillery systems and armored personnel carriers – indicating a more intense commitment than the country has already undertaken – along with additional artillery shells and helicopters.

Technical expectations for the gold price: The bullish trend in the gold market is getting stronger, and the price of an ounce of gold crossed the 1975 dollar barrier. Expectations may increase again to move towards the next historical psychological resistance level of 2000 dollars an ounce at the earliest. This is especially if the gold market continues to ignore the trend of global central banks to further tighten their policy. Global geopolitical tensions and the persistence of the epidemic will remain the most important factors supporting the bulls’ dominance.

On the other hand, according to the performance on the daily chart, the movement of the gold price towards the support level of 1920 dollars per ounce will be important to enable the bears and I still prefer buying gold from every descending level.