Collapse – xMetaMarkets.com / Online Innovative Trading Facility Fri, 08 Jul 2022 01:11:04 +0000 en-US hourly 1 https://wordpress.org/?v=6.6.1 /wp-content/uploads/2022/07/cropped-Logo-menu-32x32.png Collapse – xMetaMarkets.com / 32 32 Gold Forecast: Markets Continue to Collapse /2022/07/08/gold-forecast-markets-continue-to-collapse/ /2022/07/08/gold-forecast-markets-continue-to-collapse/#respond Fri, 08 Jul 2022 01:11:04 +0000 https://excaliburfxtrade.com/2022/07/08/gold-forecast-markets-continue-to-collapse/ [ad_1]

People have given up on gold and it’s likely that we will continue to see plenty of downward pressure on any attempt to recover.

Right now, the only thing that seems to be working is the US dollar, which is the opposite side of this trade. You short gold, you buy US dollars. In this scenario, I think that the $1800 level above is significant resistance, as it was previous support. The uptrend line also sits just above there, and then of course we have the 50-day EMA breaking below the 200-day EMA, forming the so-called “death cross.” All of this leads to a very bearish attitude in this market, so I hope we get a rally at this point because I am more than willing to start shorting it.

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What Do the Candlesticks Show?

A couple of candlesticks that have made up the last 48 hours show just how negative this market has gotten, and these types of moves very rarely happen in a vacuum. This is not to say that we cannot rally, just that the rallies will eventually end up being selling opportunities at the first signs of trouble. In fact, I do not have a situation where I’m willing to buy this market, as we are so bearish. In order to make a shift in attitude, we would need to see at least a $100 turnaround, something that would take a lot of effort.

The market will continue to draw from here, perhaps reaching the $1700 level. After that, we could see gold really fall apart. I would anticipate a lot of volatility, but it’s obvious that people have given up on gold and it’s likely that we will continue to see plenty of downward pressure on any attempt to recover. As long as the US dollar continues to be strong, there’s no real hope for gold taking off.

Gold

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Euro at Risk of Further Collapse /2022/07/07/euro-at-risk-of-further-collapse/ /2022/07/07/euro-at-risk-of-further-collapse/#respond Thu, 07 Jul 2022 17:47:44 +0000 https://excaliburfxtrade.com/2022/07/07/euro-at-risk-of-further-collapse/ [ad_1]

In the middle of this week’s trading, the euro fell 1.47% against the dollar and became vulnerable to more losses, says analyst Fouad Razakda of City Index. He said that it is no secret that the Eurozone economy is not doing well, with the outlook looking bleaker by the day. And the fact that the EUR/USD pair is trading at its lowest levels since 2022, reflects this miserable overall outlook. The losses of the EUR/USD pair extended to the 1.0161 support level, its lowest since 2002, and is stable around its losses in the beginning of Thursday’s trading.

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The reason for the euro’s decline… is the weakness caused by rampant inflation, concerns about energy and rising borrowing costs. We have seen consumer, corporate and investor sentiment all take a big hit, with the PMIs also falling. Coupled with this, persistent tensions between Europe and Russia over natural gas supplies mean that business sentiment in Germany in particular is unlikely to improve any time soon. This will keep the manufacturing sector under pressure. Meanwhile, the European Central Bank’s determination to fight inflation will continue as interest rates rise. This will have a price, but they have no other choice. Overall, it is a vicious cycle. The threats of waning economic growth and stubborn inflation are supposed to undermine risky assets.

This is exactly why German investor sentiment has hit a new record. That’s what the latest Sentix poll revealed on Monday. And there was more bad news from Germany. The eurozone’s largest economy reported its first monthly trade deficit in three decades. Clearly, higher import prices had the biggest impact, with prices for energy, food and parts used by manufacturers up more than 30% in May compared to a year ago.

But it also points to weak demand from abroad, which comes as no surprise given how much the economic outlook has deteriorated in recent months.

The question now is: Where is the next for the EUR/USD pair?

It is clear that the overall stronger trend for the EUR/USD is to the downside and we could soon talk about 1.02, then 1.01 and so on. And something has to change fundamentally to turn the tide. Any recovery we get in the meantime will be primarily driven by short coverings. The major resistance now forms the basis for today’s breakout and former support around the 1.0350 region.

Looking ahead, the focus will shift to the US as we delve deeper into the first full week of July and the third quarter. The highlight in the middle of the week’s trading was the announcement of the minutes of the last meeting of the Federal Open Market Committee (FOMC) which is in sharp focus as investors try to discover exactly how optimistic each member is and how they see interest rates developing in the coming months. Then, on Friday, the monthly US non-farm payrolls report will put the dollar and gold in focus. The non-farm payrolls report has become less important to the markets as the focus has shifted to inflation and economic growth rather than employment. Thus, the only thing that will be important from the jobs report is the wage portion. Workers will demand higher wages to keep up with inflation.

EUR/USD Technical Outlook

The general trend of the EUR/USD pair is still stronger to the downside. Investors will not care about the arrival of technical indicators towards oversold levels as far as interacting with the factors of the gains of the US dollar and the continued faltering of the euro. As I mentioned before, the Russian-Ukrainian war will remain an extension of the negative pressure factors on the euro for a longer period as long as the war continues. The closest bearish targets are currently 1.0135 and then the parity price for the currency pair.

On the other hand, bulls need to gain momentum as soon as moving towards the 1.0600 resistance as is the performance on the daily chart below to make a first breakout of the current trend. The euro-dollar will be affected today by the announcement of the US jobless claims and the statements of a number of US monetary policy officials.

EUR/USD

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Sterling Price Set for Collapse /2022/07/05/sterling-price-set-for-collapse/ /2022/07/05/sterling-price-set-for-collapse/#respond Tue, 05 Jul 2022 17:24:52 +0000 https://excaliburfxtrade.com/2022/07/05/sterling-price-set-for-collapse/ [ad_1]

During the last week’s trading, the most prominent decline in the Forex market was the collapse of the GBP/USD pair towards the 1.1975 support level, penetrating the 1.2000 psychological support. This indicated the possibility of moving towards it a lot, especially when the GBP/USD approached the 1.2175 support. With the beginning of this week’s trading, the GBP/USD pair tried to maintain its gains around 1.2165, but the pressures on the sterling pound are still strong and continuous, and the currency pair settled around the 1.2100 support level, waiting for any new developments.

The British Pound overcame a reversal of a bullish dollar since the beginning last week and had slipped below the 1.20 level on Friday before the greenback suffered a setback from the June ISM manufacturing PMI reading. Commenting on this, Chris Weston, chief market analyst at Pepperstone.” Friday’s US ISM manufacturing report showed a significant deterioration in new orders and sub-components of employment (both moved into contraction) and while inventories rose to 56.0, the sentiment is not a sign of easing supply chains (Positive in stocks), but a sign that demand is declining.”

“The potential for a technical recession is now very high, and although the labor market is in poor health, not many will feel long-term economic pain,” he added. That may, unfortunately, come too far during the year and the fact that we have cuts of 77 basis points in US rates for 2023 indicates that the market sees this as an increasing possibility.

The US dollar did not benefit from Friday’s downside surprise in the ISM manufacturing survey or the core PCE price index, the Fed’s preferred inflation measure, which paused for June on Thursday and dragged the annual rate down from 4.9% to 4.7% on the way.

Also, the British Pound extended its losses and only accumulated gains on the Dollar among the major data releases, while many analysts attributed this to growing market concerns about the outlook for US and global economic growth. So says Paul Robson, currency analyst at Natwest Markets, “The only economy where growth forecasts have actually been revised down significantly is the UK. Bank of England Governor Bailey sounded very cautious about the economy in Sintra, noting that the UK was at a tipping point and may be weakening faster than other countries.

“It appears to be a widely held view in the market already, so there is less room for such comments to alter sentiment toward the currency,” the analyst added. The GBP/USD continues to trade weakly, against our expectations, although this week the story has been more stronger than the US Dollar It’s more of an independent weakness story. With the USD outlook more balanced, we hold the view that GBP/USD forms a base around 1.20.”

It may also be relevant this week, however, as Friday’s rally was accompanied by continuous joint movements between GBP/USD and GBP/CAD during the hours before and after the London close, indicating the emergence of a bid Great sterling in Asia. Where this persists for more than a moment in GBP/CNH, it likely reflects oversight of the floating renminbi-sterling exchange rate by the People’s Bank of China (PBoC); Something that the sterling bears might overlook at their own risk. But it is also likely that much will now depend on whether the dollar continues its decline on Friday from long-term highs against many currencies, which in turn will likely depend on the market’s response to a host of events in the US calendar for the coming days.

GBP/USD analysis

Bearish penetration of the price of the GBP/USD currency pair to the support level 1.2175 still supports the move towards psychological support 1.2000 and much less than that. The US dollar is still stronger with expectations of raising US interest rates throughout 2022 and the pound, despite the expectations of raising interest rates from the Bank of England, but it faces pressure factors from British political anxiety and fears of a grinding economic recession. On the other hand, to cause a breach of the current trend, the bulls will have to rush towards the resistance level 1.2465, according to the performance on the daily chart below. The British pound will interact today with the announcement of the British Services PMI reading and the statements of the Governor of the Bank of England.

GBP/USD

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USD/JPY Technical Analysis: Continued Collapse of JPY /2022/06/28/usd-jpy-technical-analysis-continued-collapse-of-jpy/ /2022/06/28/usd-jpy-technical-analysis-continued-collapse-of-jpy/#respond Tue, 28 Jun 2022 17:19:24 +0000 https://excaliburfxtrade.com/2022/06/28/usd-jpy-technical-analysis-continued-collapse-of-jpy/ [ad_1]

Japanese officials’ ignoring of the continuous collapse of the Japanese yen exchange rate, along with the US Federal Reserve’s continued intention to raise US interest rates strongly during 2022, are still important factors for the continuation of the strong upward trend of the US dollar against the Japanese yen pair, with gains to its highest in 24 years. Its recent gains brought it to the resistance level of 136.72 and it settles around the level of 135.48 at the time of writing the analysis.

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Amid the US central bank’s leadership of global central banks to raise interest rates to contain historical inflation. Bank Chairman Jerome Powell reiterated the comments he already made at the press conference after the June decision to raise the US interest rate by a massive 0.75%, raising it to 1.75%, although its impact was more pronounced on the stock and bond markets last week.

The US dollar’s declines last week were in contrast to its usual reaction to market concerns about the outlook for the global economy and many analysts still expect it will benefit from any further deterioration. Accordingly, the could rise to 106 pips this week. “The increased risks of a global recession, or at least a sharp slowdown, support further gains in the US dollar,” says Joseph Caporso, an analyst at the Commonwealth Bank of Australia.

All this leaves much to be determined this week by a flurry of important economic numbers from the US in the coming days, which includes the May edition of the Fed’s favorite inflation gauge; Core personal consumption expenditures price index. The consensus expects the core PCE price index to rise 0.4% last month, up from 0.3% previously, but from 4.9% to 4.8% year over year. Commenting on this, Kevin Cummins, chief US economist at Natwest Markets, says: “Not all of the strength in core CPI (such as airfare and auto insurance) will be fed into the core PCE deflation.”

We expect core PCE deflator to advance 0.4% (0.383% unrestricted), stronger than the 0.3% streak of gains in the previous three months but still less than the 0.6% gain in core CPI. On an annualized basis, our realization of our forecast would pull the core PCE inflation rate from 4.9% in April to 4.7% in May as the 0.6% rise from last May is off the mark.”

USD/JPY Analysis:

The general trend of the dollar yen currency pair is still bullish. Despite the technical indicators reaching strong overbought levels after the recent record gains, the continuation of the above mentioned factors guarantees the currency pair to continue to test ascending level. The closest to it is currently 136.20 and 137.00, respectively, and stability above the last level will strengthen expectations with a stronger upward move, psychological resistance 140.00 may be the ideal destination for the bulls.

On the downside, there will be no first break of the trend without moving below the 130.00 level. The USD/JPY currency pair will be affected today by the extent to which investors take risks or not, in addition to the announcement of the US consumer confidence reading.

USDJPY

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Amid Rapid Collapse of Gains /2022/05/19/amid-rapid-collapse-of-gains/ /2022/05/19/amid-rapid-collapse-of-gains/#respond Thu, 19 May 2022 17:20:53 +0000 https://excaliburfxtrade.com/2022/05/19/amid-rapid-collapse-of-gains/ [ad_1]

Sterling fell strongly after the UK’s headline CPI inflation recorded 9.0% yeary-on-year, lower than the 9.1% market had been expecting, but remarkably up from 7.0% recorded in March. The bulk of the gains in inflation were linked to higher energy costs due to Ofgem’s price cap hike in April, and thus economists were largely expected. Accordingly, the price of the GBP/USD currency pair quickly gave up the rebound gains, which reached the 1.2500 resistance level, quickly dropping to the 1.2326 level in the beginning of trading today, Friday.

The next rise in energy prices comes in October when UK inflation is expected to peak near 10%, according to the Bank of England’s forecast. Inflation remains undoubtedly hot, but today’s disappointing numbers against expectations may offer hopeful crumbs to put pressure on households.

CPI inflation rose 2.5% month over month in April, the Office for National Statistics said, up from 1.1% previously, but disappointing versus the 2.6% market expectation. Core CPI, which strips out energy effects and gives a more “organic” feel to domestic inflation, rose 6.2%, but this was in line with market expectations.

On a monthly basis, core rose 0.7% which is already below expectations of 0.8%. Thus, the data does not come as a huge surprise and will not change market expectations regarding a future rate hike from the BoE, and therefore is not likely to have a significant impact on the GBP. However, there was an indirect move down in GBP after the release, which is understandable given that many trading algorithms would be ready for such a move.

For his part, says Callum Pickering, chief economist at Berenberg Bank. From a currency perspective, the question is whether yesterday’s inflation, wages and employment data changes the dial on the number of interest rate hikes the BoE will deliver over the coming months. It appears that the stronger-than-expected wages data encouraged the markets to take further gains, which was reflected in a sharp move higher in the British Pound.

Subsequent inflation data does not have quite the same effect.

Indeed, given both sets of data, Pickering is not convinced that the bank will be inclined to precipitate offering higher interest rates. The bank said: “The big rise in wages in March was due to huge bonuses rather than the sharp acceleration in core wage growth, the big rise in CPI driven by the overseas-driven rise in energy prices, and BoE policymakers are likely to be less concerned with the latest data. than some of the headlines might suggest.

This could deprive the pound of a basic idea of ​​the rise.

“Nothing gets worse forever,” says Morgan Stanley. Morgan Stanley says the dollar should head down decisively by the fall, which will allow the British pound and other major currencies to recover. And in a mid-year strategy update, Morgan Stanley analysts expect more strength in the Northern Hemisphere summer, although this strength is expected to be modest and will ask questions about the bearish outlook in the analyst community for levels below 1.20.

The pessimism of the Bank of England, along with the contrasting results of the recent British economic data and the return of Brexit skirmishes, will remain factors of weakness for the performance of the GBP/USD currency pair in the coming days. Attempts to rebound may be opportunities to consider selling the GBP/USD. A breakdown below the support 1.2220 is important to look towards the next psychological support 1.2000. On the other hand, and as I mentioned before, a strong reversal of the current trend will not occur without the pair breaching the resistance levels of 1.2850 and 1.3000; otherwise the general trend will remain bearish.

GBP/USD

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GBP/USD Technical Analysis: Rebound Gains to Collapse /2022/05/18/gbp-usd-technical-analysis-rebound-gains-to-collapse/ /2022/05/18/gbp-usd-technical-analysis-rebound-gains-to-collapse/#respond Wed, 18 May 2022 16:11:55 +0000 https://excaliburfxtrade.com/2022/05/18/gbp-usd-technical-analysis-rebound-gains-to-collapse/ [ad_1]

The British pound succeeded in achieving gains against the euro and the dollar after the release of British labor market statistics that revealed a strong jump in wages and a larger-than-expected drop in unemployment. In the case of the GBP/USD currency pair, it moved towards the resistance level of 1.2498. It rebounded from its lowest level in two years, when it tested the support level of 1.2155 last week, amid the collapse of the price of sterling in the forex market amid the sharp pessimism of the Bank of England.

According to official figures, the United Kingdom added 83,000 jobs in the three months to March, the Office for National Statistics said, far more than the 5,000 jobs the market was looking for. The unemployment rate unexpectedly fell to 3.7% from 3.8%, a 50-year low. Average wages, including bonuses, rose 7.0% in March, well above the 5.4% that the market was looking for.

The data was stronger than the markets had expected and will continue to pressure the Bank of England to continue raising interest rates.

This is because a “tight” labor market – one in which unemployment is low but demand for workers is strong – of the kind seen in the UK will continue to put pressure on wages, which in turn will drive up inflation. The bank can’t simply stand back and do nothing in the face of this kind of data.

The data risks making the Bank of England’s outlook for the economic outlook too pessimistic. Bank Governor Andrew Bailey told members of Parliament’s Treasury Committee on Monday that the bank continues to expect unemployment to rise in the coming months as the effects of the slowdown in the economy become more felt. The assumption is that inflation – which the bank expects to rise to 10% – will eventually cause economic growth to stall as consumers are forced to become more conservative.

This is expected to lead to higher unemployment, so the bank said that limited increases in interest rates are needed from here. This contrasts with a market that still expects about 100 more basis points of gains in 2022 alone. Given the recent labor market data, it may be the bank that has to move toward market expectations.

This ultimately supports the pound sterling.

Commenting on this, Ricardo Evangelista, chief analyst at ActivTrades said, “The British pound is benefiting from the surprisingly positive data released recently, with both unemployment and wages figures beating expectations, painting a more positive picture of the UK economy than expected. Against this background, expectations of the Bank of England’s intervention – an increase in the pace of monetary policy tightening – have risen; With inflation data expected today to top 9%, Bank of England officials will have little choice but to continue raising interest rates, creating scope for further pound gains.”

He added that the number of job vacancies in February to April 2022 rose to a new record high of 1,295,000; An increase of 33,700 from the previous quarter and an increase of 499,300 from the pre-coronavirus pandemic level in January-March 2020. In January-March 2022, the ratio of unemployed to each vacancy remained at 1.0 and for the first time the number of vacancies was greater than the number of vacancies Unemployed people, according to the Office for National Statistics.

This suggests that the UK labor market will remain strong for some time now, even in the face of rising inflation.

However, much of the labor market’s “tightness” is a symptom of a troubled workforce due to a number of factors, including fewer EU citizens coming to the UK to work, long-term sickness rates after Covid and older workers who offer Retirement plans after the pandemic. Rising inflation will prompt more people to look for work again as income levels are reassessed. Falling stock markets and falling cryptocurrency values ​​will also cause more people to return to the workforce.

According to the technical analysis of the pair: According to the performance on the daily chart below, and despite the attempts to rebound, the general trend of the GBP/USD pair is still bearish. Over the same period of time, there will be no reversal of the trend without breaching the 1.2848 resistance levels and the psychological top 1.3000, the boundary between recovery and continuing the current bearish trend . On the other hand, the support level at 1.2330 is still important for further launch of the bears towards the most expected psychological support at 1.2000 after that. Today, the sterling will be affected by the announcement of British inflation figures.

GBPUSD

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EUR/USD Technical Analysis: Euro Continues to Collapse /2022/04/26/eur-usd-technical-analysis-euro-continues-to-collapse/ /2022/04/26/eur-usd-technical-analysis-euro-continues-to-collapse/#respond Tue, 26 Apr 2022 17:08:30 +0000 https://excaliburfxtrade.com/2022/04/26/eur-usd-technical-analysis-euro-continues-to-collapse/ [ad_1]

Investors’ appetite for buying the US dollar increased amid sharp statements from Federal Reserve policy officials that it will be hawkish in raising US interest rates throughout 2022. The bank’s officials, even Governor Jerome Powell, changed their tone of caution and emphasized opportunities to raise US interest rates strongly to contain record inflation, which has reached its highest in 40 years. Accordingly, the free collapse of the EUR/USD currency pair was natural, as the pair collapsed to the 1.0696 support level, the lowest in two years, and settled around the 1.0712 level at the time of writing the analysis.

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Euro exchange rates did not make any lasting gains on the news of Emmanuel Macron’s re-election as President of France on Sunday, with Macron receiving 58.5% of the vote, defeating rival Marine Le Pen. And while Macron’s victory was largely expected by markets, closing any hedge on surprise would provide some initial rally in the eurozone currency. However, gains were recorded against the majority of the euro peers in the G10.

Commenting on the performance, Nigel Green, CEO of De Vere Group, said: “European markets and the euro are likely to see a comfortable rebound over Macron’s re-election and his pro-business and pro-European agenda.”

The markets were spared the shock and uncertainty that would have sent them into a tailspin if Le Pen had won, Green says, because it would have set France on a completely different path. “But this could be short-lived, especially since his victory has already been largely determined by the markets,” the analyst added. “As the news spreads, attention will shift to other pressing geopolitical matters that will affect global markets.”

Despite Macron’s victory, the far right still managed to secure its largest share of the vote ever, while voter turnout was close to record lows. Accordingly, the analyst comments, “The markets have avoided crashing with Le Pen’s victory, but investors should not be complacent. There are still significant global headwinds that can negatively impact returns. However, volatility always brings enhanced investment opportunities.”

Any possibility of the rally offered by Macron’s victory for the Euro could be quickly outweighed by other pressing issues facing investors that may ultimately benefit the Dollar. Investors will focus on the worsening COVID situation in China, the world’s second largest economy. Accordingly, analysts say, the Asian power is facing the worst spread of the Covid virus since the beginning of the epidemic in late 2019, as major cities such as Shanghai were closed.

Risk appetite appears to be weak after the People’s Bank of China (PBOC) rejected the opportunity to cut its policy rates today, despite the sharp economic downturn and recent calls from Beijing for monetary support. Accordingly, analysts see other factors leading to lower market sentiment include continued severe inflation, expectations of rate hikes from most major central banks, and the persistence of global uncertainty created by the Russia-Ukrainian war.

Future expectations for this week’s trading from the euro to the dollar: surrounded by headwinds with the expectation of inflation data

The EUR/USD exchange rate hit a new two-year low early this week and could remain under pressure near the 1.08 level over the coming days as domestic and international headwinds subdue the single European currency. The European single currency did not benefit from the re-election of French President Emmanuel Macron on Sunday and instead fell to nearly 1.07, its lowest level since April 2020.

There is a clear disregard on the part of Forex traders after the losses of the EUR/USD pair for the technical indicators reaching oversold levels, as the factors of the currency pair’s weakness continue. The policy of global central banks led by the US Federal Reserve, and recently, fears of another COVID outbreak, joined these factors. The bears’ control over the performance of the EUR/USD is still continuing, and accordingly, the currency pair is subject to testing stronger support levels, the closest of which are currently 1.0645 and 1.0530.

On the upside, and according to the performance on the daily chart, the EUR/USD pair needs to stabilize above the 1.1000 level to have a chance to rebound. However, until this moment, any gains in the EUR/USD will remain an opportunity to sell again. As long as the weakness factors mentioned above exist. Today, the euro-dollar does not expect important European data, and from the United States, durable goods orders, US consumer confidence and US new home sales will be announced.

EUR/USD

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GBP/USD Technical Analysis: Free Price Collapse /2022/04/25/gbp-usd-technical-analysis-free-price-collapse/ /2022/04/25/gbp-usd-technical-analysis-free-price-collapse/#respond Mon, 25 Apr 2022 13:42:56 +0000 https://excaliburfxtrade.com/2022/04/25/gbp-usd-technical-analysis-free-price-collapse/ [ad_1]

Last Friday’s session was harsh for the price performance of the GBP/USD currency pair, as the currency pair fell from the resistance level 1.3034 to the 1.2823 support level. This is its lowest since September 2020, losing more than 200 points in one trading session. The decline came after UK economic data forced financial markets to reconsider the outlook for the Bank of England. The British pound was the biggest long-term loser on Friday after data from the Office for National Statistics (ONS) revealed a sharp decline in the volume and value of UK retail sales for the past month in a strong indication that lower household income is now hampering total income.

UK retail sales fell -1.4%, much more than economists had expected, making it their biggest drop in one month for nearly a year. This is a result that came as a huge blow to the recently pumped pound on the back of very ambitious market expectations for an interest rate from the Bank of England.  Commenting on this, Bethany Beckett, an economist at Capital Economics, said: “The significant drop in retail sales in March marks the second consecutive month of decline and adds to the evidence that real wage pressures are hurting consumer spending.”

“With CPI inflation already at a 30-year high and set to continue rising, there is a real risk of a direct decline in consumer spending in the coming quarters,” Beckett also said in a review of the data.

Stephen Gallo, FX Analyst at BMO Capital Markets says, “The position of the 2-year GBP/USD swap spread for cable suggests that the drop in spot is a bit exaggerated (in the near term), but we believe the trend in sterling based on fundamentals is the right direction.” “We prefer the sell side of the GBPUSD, especially on rallies above 1.30,” he added.

The pound rose in the previous session after financial markets concluded, perhaps incorrectly, that Bank of England policymaker Catherine Mann was suggesting in a speech on Thursday that she might vote for a massive 0.5% increase that would raise the bank rate from 0.75%. to 1.25% in May. MPC member Mann cited “extremely strong sales and price expectations” from large companies participating in the Bank of England surveys and the possibility of higher payrolls for the workforce to anticipate the continuing risks of a prolonged period of above-target inflation on Thursday.

According to the performance of the forex market, warns Kit Juckes, FX analyst at Societe Generale, “It now appears that 1.30 GBP/USD has broken decisively and a realistic 1.25 target. GBP/USD is likely to match any decline in EUR/USD that comes as a result of concerns about gas supplies to Europe and the state of war in Ukraine.”

“Monetary policy needs to keep inflation expectations steady; By doing this now, further tightening will be needed later, when demand is still weak,” he said. Mann suggested that if these sales and price expectations actually come true and “if the impact on aggregate demand of the energy price shock is more modest than currently expected”, the BoE is likely to raise interest rates sharply in the coming months.

However, the retail spending data for March may have ruled that out.

Friday’s IHS Market survey of large service-oriented firms also pointed to growing headwinds in the UK’s largest economic sector. “This really reiterates what we said in the February monetary policy report and the March MPC meeting minutes, you know, we are now walking a very fine line between addressing Inflation and the production effects of the real income shock and risks that may lead to a “recession”.

The pound-dollar exchange rate reached its lowest level since September 2020 in the wake of Friday’s data and was quickly approaching a key level of technical support on the charts. Robert Wood, UK economist at BofA Global Research, says: “We estimate consumer confidence to have a 35% chance of a recession. However, company surveys are stronger.”

The strong dollar added to the pound’s losses after Federal Reserve Chairman Jerome Powell said at the last meeting of the International Monetary Fund and the World Bank Group last Thursday that a higher-than-usual rate hike is now on the table in the US next month.

While financial markets were already pricing in a 0.50% rise in the fed funds rate, from 0.5% to 1%, the dollar was still broadly ahead overnight and into the last session of the week’s trading.

According to the technical analysis of the currency pair: In the near term and according to the performance of the hourly chart, it appears that the GBP/USD currency pair is trading within the formation of a sharp descending channel. This indicates a strong short-term bearish momentum in the market sentiment. Therefore, the bulls – are targeting potential recovery profits at around 1.2863 or higher at 1.2908. 

GBPUSD

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Risk of Collapse to 1.30 Support /2022/03/29/risk-of-collapse-to-1-30-support/ /2022/03/29/risk-of-collapse-to-1-30-support/#respond Tue, 29 Mar 2022 16:52:39 +0000 https://excaliburfxtrade.com/2022/03/29/risk-of-collapse-to-1-30-support/ [ad_1]

GBP/USD’s rebound from early March lows faltered around 1.33 and around a notable level of technical resistance on the charts last week, leaving it vulnerable to a deeper setback over the coming days. At the beginning of this week’s trading, the pair collapsed to the vicinity of the support 1.3066, before settling around the 1.3100 level at the time of writing the analysis. The British pound rose strongly from the opening last week before being forced to retreat when the dollar stabilized after the comments of Federal Reserve Chairman Jerome Powell and with the pound weakening in the wake of the February inflation figures.

Inflation in the UK surprised the upside of market expectations when it rose from 5.5% to 6.2% despite the decline in the GBP/USD and other GBP pairs during the following trading session. This response could be a symptom of uncertainty over whether the Bank of England (BoE) will meet market expectations of a bank interest rate in the coming months. There is uncertainty emerging as the Federal Reserve increasingly warns that it may raise rates. The US market will be faster than the market expects in the near future.

The dollar found its feet against the British pound, the euro and the Japanese yen after Chairman Jerome Powell told the National Association of Business Economics conference last Tuesday that the Federal Reserve may raise the US interest rate by 0.50% on more than one occasion in the coming months. Since then, prices in the swap markets have shifted to imply a high probability of a Fed funds rate hike from 0.5% to 1% in May, but stopped short of indicating that this is uncertain, which is a lingering bullish risk for the dollar.

Jerome Powell said, “I don’t have a test here to see what that’s going to lead to, but the expectation going into this year was that we’ll see inflation peak in the first quarter and maybe level off and then see a lot of progress in the second half.” He added, “That story has really broken down.” To the extent that my colleagues continue to disintegrate, I may come to the conclusion that we will need to move more quickly, and if that is the case we will.”

Expectations for the federal funds rate may be sensitive to Thursday’s core PCE price index for February, the Fed’s preferred measure of inflation and its final reading is likely to appear before the Russian invasion of Ukraine. The invasion has sharply raised global energy and food costs, is widely expected to push up inflation further worldwide in the coming months and has proven to be a headwind for the sterling price as well.

According to the technical analysis of the pair: On the daily chart below, it seems clear that the bears may head in the price of the GBP/USD currency pair towards the 1.3000 psychological support level again unless the sterling gains momentum to stop the pace of its losses. A dollar from each ascending level is the most prominent performance in light of the continuation of the Russian war and its negative repercussions on the global and European economy in particular. Breaking the 1.3000 support will increase the pair’s suffering and therefore move strongly to the downside. On the other hand, and over the same period, the resistance 1.3335 will be important for the upward trend.

GBPUSD

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