GBP/USD: GBP IS CONSOLIDATING
GBP declines slightly against USD this morning session, trading below the psychological level of 1.3900. The day before, the instrument failed to consolidate at new record highs, and by the end of the afternoon session, it retreated to the opening levels. The reason for the decline was the correctional sentiment in favor of USD, while the fundamental picture is changing slightly.
GBP is feeling strong support from the conclusion of a trade agreement between the UK and the EU, and is also growing with an eye on the imminent lifting of quarantine restrictions by the British authorities in March.
Today, British investors expect the publication of January statistics on consumer inflation and producer price index. It is projected that consumer inflation in the country will show further deceleration, which will put pressure on GBP.
Support And Resistance
Bollinger Bands in D1 chart show active growth. The price range expands from above, freeing a path to new local highs for the “bulls”. MACD indicator tries to reverse downwards and to form a new sell signal (the histogram has to consolidate below the signal line). Stochastic is showing similar dynamics, retreating from its highs, indicating strongly overbought GBP in the ultra-short term.
The appearance of a full-fledged downtrend is possible in the short and/or ultra-short term.
To open new short positions, one can rely on the breakdown of 1.3861. Take-profit – 1.3760. Stop-loss – 1.3920. Implementation time: 2-3 days.
A rebound from 1.3861 as from support followed by a breakout of 1.3900 may become a signal for new purchases with the target at 1.4000. Stop-loss – 1.3845.
EUR/USD: US YIELD RISING SUPPORTS THE DOLLAR
Yesterday, with the opening of trading on the New York Stock Exchange, the EUR/USD pair sharply changed its direction of moving. US Treasury yields renewed annual highs, reaching the level of 1.292% on 10-year notes and 2.095% on 30-year notes. Meanwhile, the stock market corrected downward from local highs, closing below the opening level.
The EU Q4 2020 GDP decreased by 0.6% and by 5.0% YoY. Employment is recovering but slowly, rising only by 0.3% QoQ. The February index of economic sentiment from the ZEW rose to 69.6 points from the previous reading of 58.3.
In general, the greenback is expected to strengthen further before the adoption of the US $1.9 trillion financial stimulus bill. The correction of the euro towards a long-term uptrend is likely to continue but investors should pay attention to the ECB monetary policy statement at 10:00 (GMT+2) today.
Support And Resistance
Initially, the instrument was in a strong resistance area of 1.2175–1.2160 but after the release of news on the EU and the US, the rate dropped to 1.2110.
The RSI indicator is in the neutral zone. The instrument is moving within a medium-term downtrend, the key resistance of which is the margin zone 1.2128–1.2112. While this area is held, it is worth opening short positions with a target in the area of the February low.
Short positions may be opened from 1.2120 with the target at 1.1954 and stop loss 1.2174. Implementation period: 5–7 days.
Long positions may be opened above 1.2170 with the target at 1.2320 and stop loss 1.2108.
XAG/USD: PRICES ARE UNDER PRESSURE
Silver prices are rising marginally during today’s morning trading session, trying unsuccessfully to offset the solid decline in Tuesday’s session. The instrument quotes sagged noticeably the day before, responding to the skyrocketing yields on US Treasury bonds. 10-year bonds showed an increase to 1.2484%, which was a record high since March 2020. Additional pressure on the instrument was exerted by the American stock market, which is also subject to stable “bullish” tendencies.
Investors are awaiting approval of the USD 1.9 trillion economic support package previously proposed by Joe Biden. The Democratic position in Parliament allows Biden to ignore Republican opposition to some extent, reinforcing market confidence that the aid package will be approved as early as March. The epidemiological situation, which is improving with the spread of vaccines, is optimistic as well.
Support And Resistance
In the D1 chart, Bollinger Bands are reversing horizontally. The price range is almost unchanged, but it remains rather spacious for the current level of activity in the market. MACD indicator tries to reverse downwards and to form a new sell signal (the histogram has to consolidate below the signal line). Stochastic is showing unsteady flat dynamics and is located in the middle of its area.
To open new trading positions, it is necessary to wait for the signals from technical indicators to be clarified.
To open long positions, one can rely on the breakout of 27.65. Take-profit – 28.87. Stop-loss – 27.00. Implementation time: 2-3 days.
A rebound from 27.65 as from resistance followed by a breakdown of 27.14 may become a signal for new sales with the target at 26.27. Stop-loss – 27.65.
CONSUMER PRICE INDEX. UK, 09:00 (GMT+2)
At 09:00 (GMT+2), British data on the Consumer Price Index for January will be released. It is the main indicator of inflation in the country and determines the change in the level of retail prices for a particular basket of goods and services: food, transportation, utilities, healthcare, etc., having a significant impact on monetary policy decisions. The CPI is expected to decline from +0.6% to +0.5% on an annualized basis.