Technical Chart pick of the day: GBP/USD – Bearish
· On a technical perspective, the trend is bearish, with prices below the 20, 40, 100 and 200 EMA.
· Prices failed to break above the 20 EMA and retraced. This indicates that selling pressure is present.
· Based on the pivot point analysis, prices are below the pivot level. This signifies bearishness.
Resistance: R1: 1.28629, R2: 1.29116, R3: 1.29949
Support: S1: 1.27796, S2: 1.27450, S3: 1.26617
The Federal Reserve stated that review of economic data before making further policy adjustments ought to be adhered to. Thus, although it is widely suggested that the Fed is unlikely to slash rates further during the FOMC meeting in December, markets would still attempt to price in possible rate reductions by the Fed next year.
The GBP dipped yesterday, after two Bank of England (BOE) members unexpectedly voted to cut interest rates. Although interest rates eventually stood pat, as most BOE members stated that they would only consider slashing rates if global and Brexit headwinds did not lift, the unexpected dovish twist in the BOE’s vote was sufficient to further dampen confidence towards the GBP. While it was widely anticipated that the BOE was likely to remain cautious due to tax and spending decisions being placed on hold until after the 12th December UK elections, the unexpected vote split in the BOE could suggest that the BOE may prematurely take a dovish stance. Hence, as the BOE had as a whole painted a darker picture for UK economy over the next three years, coupled with the two main political parties promising to spend billions on infrastructure during their campaign speeches, there is a strong likelihood that record-low interest rates may follow very soon in the UK. Although attention is now placed towards the election, the key Brexit risk remains. Until that problem is resolved, it would continue to weigh down investors’ confidence, a risk due to increase in the event of a hung parliament.