GBP and EURO Still Weak as Monetary Policy Continues To Dominate
On Tuesday the Bank of England published its half-yearly report of financial stability, afterwards Mark Carney, the governor, held a press conference in which he highlighted the success of the recent stress tests of major British banks.
In this conference he also stated that asset prices are sensitive to rising interest rates and spoke of the risks related to emerging economies. Despite these statements, the GBP gained moderately against the US dollar, which was hit hard as a result of the publication of a lower benchmark in US manufacturing PMI in November. This has fallen under the 50 threshold for the first time since 2013, which indicates a contraction in manufacturing activity.
GBP / USD closed Tuesday’s session at 1.50799.
Looking into technical analysis GBPUSD has bounced from the support around $ 1.50, after the RSI indicator printed a bullish divergence. The price touched the resistance at 1.5125, but has since fallen back towards support. A break would target the 1.5015 level.
The exchange rate of the euro / us dollar has been benefitting from short positions unwinding, early in the week. But the big monetary policy is due on Thursday, December 3rd. The EURUSD has lost 1100 pips during the last six weeks. Even though the market rebounded slightly, the downside trend still prevails on the eve of the European Central Bank (ECB).
Keeping up with its usual trend this week, the US dollar has strengthened against a background of disappointing economic indicators, including yesterday, the manufacturing PMI US for November, which was the lowest since 2009 showing slowdown in this area and bringing this leading indicator (which is respected by investors) in contraction territory. The PMI in November will lower the rate hike expectations by Federal Reserve in the coming months, particularly after the annual meeting fixed for Wednesday, December 16.
Technical analysts will be watching the 1.0560 area, for if it breaks could be the beginning of a move down towards the lows of 2015 at 1.0450. Things will get interesting for certain if price ends up at that point.
Pete Southern is an active trader, chartist and writer for market blogs. He is currently technical analysis contributor and admin at this here blog.
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