Sterling to test year's high vs USD: Live Coverage on 15/11
No UK economic reports were released on Friday and it was quiet trading for the British pound sterling (GBP). Sterling extended its gains against the U.S. dollar and Japanese Yen but retreated versus the euro.
While the GBP/USD is poised for a test of this year's high of 1.6260, there's not much in the way of economic data to support a significant move beyond those levels. So for today we keep a sharp eye on the technical outlook.
FX rates at last update (day-on-day change)
- The pound to euro exchange rate is unchanged at 1.1970.
- The pound to US dollar rate is 0.37 pct lower at 1.6167.
- The pound to Australian dollar rate is 0.17 pct lower at 1.7664.
- The pound to New Zealand dollar rate is 0.4 down at 1.9735.
Please note that all quotes here are taken from the inter-bank markets. Your bank will levy a discretionary spread when delivering you forex. However, an independent currency specialist will seek to undercut your bank's offer, thus delivering up to 5% more FX. Please learn more here.
16:42: Carney and Co. to appear before parliament tomorrow
Tuesday brings with it some potential Bank of England related event risk for the British pound.
We doubt Carney will give anything away, ie. any hints that the Bank is considering introducing tighter policy sooner. That said, any surprises could send GBP either higher or lower.
15:58: Sell the GBP/USD in the short-term
"The GBP/USD ticked up into the key 1.6200-1.6250 resistance zone we highlighted last week. Now, the pair is inching back lower in slow trade around the 1.6200 round handle. Today’s second-tier U.S. data could push the pair slightly in either direction, but our general view is that the pair will have difficulty rallying through the key 1.6200-50 resistance zone early this week, so we will watch for sell opportunities on any bounces that emerge." - Matt Weller @ GFT.
14:45: GBP to rise… then fall back to 1.61
It's tricky calling the GBP/USD at this stage. The following analysis from Roboforex gives an indication as to why this is:
"The pound is still moving upwards; market has broken consolidation channel near 1.6195 upwards and may not start new correction right now. Later, in our opinion, pair may continue growing up to reach 1.6350 and then start falling down return to 1.6100."
Click to enlarge:
14:23: Best Yen rates in four years
The Japanese yen has fallen to a six-month low against the greenback and a four-year low against the euro and a five-year low against the British pound overnight.
14:03: GBP increasingly supported going forward
In early afternoon in London we note the GBP is under a touch of pressure. However, Emmanuel Ng at OCBC Bank believes the UK currency should remain well supported:
"Markets may look towards an appearance by the BOE’s Carney on Tuesday and the 3Q GDP numbers on Wednesday for further domestic cues while the GBP-USD may continue to be buffeted by global cross currency currents (from the EUR and USD for example) in the interim.
"On the CFTC front, net speculative GBP shorts were reduced in the latest week and our current neutral stance for the GBP-USD may be looking increasingly supported going ahead. Expect initial resistance at 1.6270 while 1.6150 is expected to offer first support."
11:03: For GBP/USD focus is on 1.6260
Ipek Ozkardeskaya gives her predictions for Cable:
"GBPUSD has rallied above key resistance at 1.6125 peaking at 1.6249. MACD is now stabilising above the zeroline and clearance of supply at 1.6125 should provide potential for further bullish rally, with our focus on 1.6260.
"On the downside the 21-DMA at 1.6075 should provide support to the current sell-off. Watch for next resistance to come into play at 1.6270 (1st Oct high) then 1.6343 (2013 high).
"The support levels from here are 1.6075 (21- DMA), 1.6045 (downtrend top), 1.5884 (13th Sep high), 1.5759 (17th June high), 1.5708 (fibo 61.8% on Jul-Oct rally), 1.5600 (resistance turned support) then 1.5429 (28th Aug low)."
09:35: BBA Mortgage Approvals fall in October
Some third tier data for markets:
United Kingdom BBA Mortgage Approvals falls to 42.8K in October from 43K in September. Despite that fall October mortgage approvals are up 32% in the past 12 months.
09:33: ECB's Hansson sends EUR lower
The EUR/USD is under pressure after ECB's Hansson says the bank is ready to cut interest rates further. This is but the latest addition in a string of recent attempts by the ECB to talk rates lower.
Interesting to note that the EUR/GBP has not been as effected as EUR/USD.
08:50: "This could be a trigger for a GBP/USD break higher"
Lloyds Bank Research on the next possible trigger for GBP gains:
"GBP/USD continues to threaten the highs of the year, helped by the continuing strong run of UK data. The highest CBI orders index since 1995 was the trigger to push UK yields up last week, and 2 year forward points in GBP/USD hit new highs for the year, underlining the potential for GBP/USD to follow it higher.
"This week sees the first revision of UK Q3 GDP, and while this is likely to be unrevised, we see risks to the upside. This could be a trigger for a GBP/USD break higher, but there is already enough positive UK news to justify new GBP/USD highs for the year."
08:33: Limited data this week for GBP
Revisions to Q3 GDP, consumer credit and mortgage approvals are the only noteworthy pieces of data on the calendar.
08:30: Traders maintain a sober approach to the British pound (GBP)
Data from the CFTC showed traders cut back on a what was already a small GBP net short positioning trimming negative contracts to 1.7k from 9.3k.
What is CFTC positioning and why does it matter?
Data from the major US futures & options exchanges (CFTC) are released each Friday evening and report positions up to the close of business on the previous Tuesday. Traders are classified as either commercial or non-commercial. The positioning of the non-commercial traders can be used as a proxy for the speculative side of the market. Extreme net long or net short positions are taken as an indication of the market’s vulnerability to a sharp reversal and are identified by the interpretation of positioning ‘percentile’ vs historical norms.
So, with GBP evenly positioned we would expect it to be less exposed to volatility brought about by squeezes.
08:15: Global markets betting on a dollar rally
"According to the latest report from the CFTC, speculators hold the largest amount of long dollar, short yen positions in 6 years." - BK Asset Management.
"Positive sentiment toward the USD has continued to build this
week at the expense of EUR and JPY as most of the remaining primary currencies were left unchanged." - Scotiabank.