The GBP/USD exchange rate has fallen back to 1.30 over recent days, but the existence of a four-week uptrend in the charts leaving analyst Richard Perry of Hantec Markets expectant of an ultimate resumption of gains.
A big breakout on GBP/USD has spent the past few sessions being dragged back again.
The reaction in the 1.3000/1.3080 band is now the focus.
For now, with Brexit trade deal newsflow limited by the 'tunnel' negotiations, GBP/USD is all about the dollar moves.
A near term dollar rebound (on broad market risk aversion) has dragged Cable back to 1.3000 again.
There is an argument to say that GBP/USD is now rising within a four week uptrend channel, and that this pullback to 1.3000 is a chance to buy.
As the near term slide begins to settle this morning, and given the mild positive bias to momentum still, this is our preferred strategy.
Channel uptrend support comes in around 1.2950 today.
A move back above 1.3080 would be a positive signal now for a renewed run higher to retest last week’s high of 1.3175.
Breaking the channel uptrend would neutralise the outlook.
Below 1.2860 is near/medium term corrective again.
Whilst markets have seemingly been hopeful (or should that be “duped”?) by the apparent signs of progress in the fiscal stimulus negotiations, as yet, there is nothing to show for it.
We are now just one week before polling day for the US Presidential and Senate election (where 35 of the 100 seats are up for re-election).
Despite the Democrat House Speaker Pelosi remaining “optimistic” there is an apparent fatigue setting in for market sentiment.
Agreement will not happen before the elections and after that, it is open to significant uncertainty on the results.
This lack of certainty on fiscal stimulus, coming as COVID-19 infections hit record levels in the US and the second wave takes full force across Europe, is leaving markets increasingly nervous.
Equities felt the full force of these concerns yesterday as Wall Street fell sharply, also with the dollar gaining strength on a safe haven bias.
There is a slight unwind of these moves early today, but how far this develops in the coming days will be shown through bond markets.
A flattening of the US yield curve (which continues this morning with US 2s/10s spread narrowing) would reflect risk aversion.
Wall Street futures have stabilised early today, but if bond yields continue to fall (and curve flatten), the dollar will climb and market sentiment will favour safe havens (such as the yen and the dollar)
It is a big US theme to the economic calendar today, but don’t forget the US announcements are an hour ahead this week as the daylight savings time shift is not until next weekend.
US Durable Goods Orders are at 1230GMT with core ex-transport good expected to increase by +0.4% in the month of September (after a +0.6% increase in August).
The Case Shiller House Price Index for August is at 1300GMT and is expected to improve to 4.2% (after +3.9% YoY in July).
The key data release for the day is US Conference Board’s Consumer Confidence at 1400GMT which is forecast to improve slightly to 102.0 in October (from 101.8 in September).