GBP/USD bulls stacked up before FOMC

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 27, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Guatemala) - GBP/USD has been clawing its way off the lows after a heavy supply took the currency below the 1.43 handle from highs of 1.4353 when bears scored a low of 1.4228 and below the 200 sma at 1.4247.

    GBP/USD has been suffering and fragile on the price of oil and its volatility while markets are also bracing for volatility to come this year on Brexit concerns. We recently heard from Carney on that in his testimony before the Treasury Select Committee in London.

    The BoE governor explained that Britain's huge current account deficit could rise in such fears on the looming EU referendum. "The global general environment has become much more febrile, much more volatile, and relying on the kindness of strangers is not optimal in that kind of environment, and that's what is the case when you're running a 4, 4-1/2% (of GDP) current account deficit," Carney explained to the lawmakers.

    We now await the FOMC coming up at the end of the hour and although it is likely a non event, the committee are likely to signal caution and that in itself could be a catalyst. " The facts are that since the last FOMC meeting: 1) the S&P 500 is down 6.8%; 2) NYMEX crude oil is about 17% lower; 3) the Broad USD index is 2.4% higher (to 15th Jan); 4) inflation expectations have dropped by about 25bps," explained Derek Halpenny at Bank of Tokyo Mitsubishi.

    GBP/USD levels

    Technically, the 200 sma on the hourly sticks is supporting the pair for the time being, with the price below the pivot of 1.4300. However, momentum on the 4hr sticks offers further room to the downside while below the pivot and targets 1.4171 and yesterday's low. Daily RSI is still not oversold either.

    A break of yesterday's lows has 1.4083 prior low and then the 1.3502 January 2009 low comes into focus again. A break the other way, on the other hand, has some work to do in a recovery towards the 20 dma at 1.4434 today before the first Fibonacci resistance at 1.4492 guarding the 1.4568 April 2015 low. A recovery needs to get past the accelerated downtrend of 19th Jan business at 1.4338 first.

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