GBP/USD has turned up from the bottom around $1.410 after Fed stepped on the brake on the rate hike path due to unstable global and U.S. economies after the first move in December 2015.
GBP / USD Daily Analysis Feb 12th 2016
However, this recovery may be held back as financial market turmoil from oil crash, global stock market selloff spurs demand for safe haven from gold and a hawkish statement from the Chairwoman of Fed.
Yesterday, February 11th, Federal Reserves President Janet Yellen had testified before the U.S. Congress about the monetary policy and economic forecast.
She admitted that “current situation of financial market becomes unfavorable for economic growth; and the prospect of economic activities and the labor market will be influenced, if such situation continues”; however, “declines in long-term interest rate and oil price can hedge such influence to some extent”. In fact, the unemployment rate at 4.9% is the only bright figure after disappointing Nonfarm payroll data.
Ms Yellen's testimony to a Congressional committee could not stop selling off on global stock markets and several currencies, including the sterling, triggered by surprise Sweden’s rate cut to negative territory.
Oversea market instability may affect the progress of the central bank and the possibility of a negative interest rate is still on the table. The oversensitive current situation makes it impossible for the central bank to raise rates at the March meeting.
However, the president tones remained quite hawkish, she stated: “I do not expect FOMC will face a choice to cut the interest rate on a short term, and I do not think it is necessary to lower the interest rates.” The bearish for dollar wouldn’t last long and GBP/USD will be soon back to the downturn as money flows into safe asset like gold, or even USD before the storm.
Today, several important data from U.S will be released, including retail sales and import price. The figures are expected to improve from he previous month ,which in turn support for the dollar and make the pound to depreciate again.
In terms of technical analysis:
Firstly, to have an overview, we will look at timeframe D1, which presents the price volatility of a day in one candle.
As we can see, after unable to break through the 50.0 Fibonacci resistance on February 4th, the pair has plunged in four out of last six trading days and currently traded at $1.44590. The price hovers between the 38.2 and 23.6 Fibonacci level with the Relative Strength Index (14) below 50 percent, indicating that the downturn is expected to keep on track.
Secondly, with the smaller timeframe as H1, we can see that when we use SMA (14) and SMA (21) lines to find a direction, the downtrend emerges clearer. In the last 4 candles, almost all of them have a long upper shadow, showing that the bear is extremely strong at the end of each hourly close.
In the timeframe M15, SMA (14) line has cut the SMA (21) line and therefore, we can set the buy orders at two points. The first one is at $1.44800 with the Stoploss at $1.45353 and Takeprofit at $1.43828.The second one is at $1.45175 with the Stoploss at $1.45824 and Takeprofit at $1.43490.