Wednesday , January 20 2021

Linked with a slight negative bias



Dollar exchange rates

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– Still stuck in a range between 1.2650 and 1.3300

– Disadvantage Trend on 4hr Chart Targets

– Brexit dominates sterling, and PMIs the main launch for USD

The pound to dollar rate is currently trading at a side range between about 1.2650 and 1.3300; and although it dropped sharply last week, from above the 1.3000 level to a near 1.2828 rate, with renewed Brexit concerns, while staying within range, it is likely to trade family levels.

It is only really possible for the pair to successfully exit the range that we could make a call with any expectation of success.

A break above range limits, for example, confirmed by a move above 1.3350, would probably be lower for a continuation to a target at 1.3660. In the case of a downgrade – confirmed by a move below 1.2600 – we can expect a follow-through to a goal at 1.2310.

Weekly chart from GBP to USD "width =" 600

The pound fell because fears of a "no-compromise" Brexit were raised after the prime minister presented the agreement he had made with the European Union. The deal prompted strong criticism from members of its own party, who believe it will eventually lead the UK to fail to make a clean break in Europe.

Conservative Party members are now moving up against the month of May and we can see a ceiling reached in the coming days, which could spark a vote of distrust on the Prime Minister. The pound is likely, therefore, to start the week ahead in the & hind; and there is a marginal bias to expect further downside since the short term, as seen in the 4hr chart, is technically low, based on the direction of peaks and valleys that have established a lower order.

If pushed to give a prediction, we would be marginally down, seeking confirmation of a break below the lows of November 15 at 1.2722 and expecting a lower follow-through to a goal just above the range of 1.2660.

GBP 4-hour USD chart "width =" 600

One of the main concerns of traders next week will be, first of all, on the political front if Theresa May can stay in power and second, whether the new protection agreement has a chance of being approved by parliament.

If rebels within their own party can successfully mount a challenge, it will likely come in the form of a vote of suspicion – potentially next week – and if success leads to a leadership challenge. Such a turnaround will certainly weaken the GBP / USD due to increased political uncertainty.

Ultimately, our basic case remains that the UK will avoid a "hard landing" and the pound will recover to pre-Brexit levels in the 1.45 to 1.50 zone.

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The US Dollar: What to Watch

Sentiment has turned negative against the dollar after more cautious comments from members of the Federal Reserve (Fed) who have suggested a perceived slowdown in global growth may decline negatively in the US and that short-term interest rates have now risen to & # 39; ; neutral & # 39; (the rate at which the economy is not growing or slowing), which is where the Fed would like them to be, and therefore a sign that it could pause on its walking schedule.

If the Fed took a break, that would weaken the dollar, as there is already an expectation that it will raise rates again in December, and if you change your mind, the resulting disappointment will likely weigh on the dollar.

Higher interest rates, or the expectation of higher interest rates, usually value one currency and vice versa for lower rates. This is because the former attract larger flows of foreign capital attracted by the promise of higher returns, while the latter act as a disincentive to the inflows.

On the front of the data, the November flash PMI is probably the main release on Friday at 3.45 GMT as it can provide an early indication of fourth-quarter growth.

Researchers have found that the first two months PMIs in a quarter when the average can be used to indicate growth for the entire quarter with a relatively high probability of success.

November PMI Composite is expected to increase from 54.9 to 56.0 and, if so, this could indicate an increase in the GDP growth rate in the fourth quarter, although the amount differs from country to country.

Another important release for the dollar is the sale of existing houses in October, at 4:00 p.m. on Wednesday, November 21. The metric should return to 5.15m from 5.2m in the previous month.

Sales of existing homes are declining since peak in March, with declines each month without fail. If they recover in October, that will mark a decline in the six consecutive months of uninterrupted declines and is likely to be positive for the dollar since housing construction, according to the old Wall Street adage "Leads the Economy."

Another big launch for the dollar the following week is that of durable goods orders in October, which is forecast to show a variation of -2.5% in relation to the previous month, against 0.8% in the previous month.

Durable goods are a volatile launch, however, and large individual orders, especially in the transportation and aviation sectors, can distort the monthly data and make it volatile.

This appears to be the case in September, when orders for durable goods rose 0.7%, driven by orders for defense aircraft that more than doubled, an increase of 118.7%.

The pound: what to watch

All eyes will be on Prime Minister Theresa May and she can stay in power.

Importantly, there is confirmation that the UK can get more U.S. concessions – this is exactly what is needed to allow DUP and Conservative party opponents to come back to the side.

On a Sky News Interview May says the key to prospects would be the next seven days when their negotiators would return to the U.S. staff and hammering the "future relationship."

She will also visit Brussels, he added, and will talk to U.S. President Jean-Claude Juncker as part of the week's discussions.

May needs more concessions and the U.S. can clearly see the plan they have set up requires some help. This news is a positive development of Pound.

Conservative rebels seeking the deposition of May may this week gather enough votes – 48 are needed – to force a vote of distrust on the prime minister. This would be a negative development of Pound.

If May loses the vote, she is out, if she survives, she will be immune to another challenge for a year.

"To remove PM May successfully would require a majority and it is much less clear
that this number would be reached, "says MUFG's Loew." If PM May is surprisingly defeated in a leadership challenge, we expect the pound to fall further 3% to 5%. This would raise concerns about the outcome of the 'No Deal' ".

Can win a vote would be Pound-positive, as it suggests that the room for maneuver of opponents' hard brexiteer & # 39; is running out fast.

There were expectations that May would be subject to a vote of suspicion on Friday, Nov. 16, but the threshold has yet to be reached, suggesting that the rebellion may actually be stagnant. At the moment of writing, there still seems to be few letters to provoke a vow of mistrust.

If it stops, we see this as a positive trigger for a potential and partial recovery of the currency.

An important event in the week ahead of the Pound is probably the hearings of the Bank of England Inflation Report conducted by members of the Treasury Committee of the House of Commons, a parliamentary body charged with overseeing public finances.

The Bank of England's comments at this hearing, especially regarding the economy's trajectory and the effect of Brexit, could impact the pound.

Recent economic data, including the CPI and retail sales, were lower than expected, while growth data suggest a slowdown in activity by the end of the year.

The hearings are on Monday at 11:00 GMT.

The other key release is the CBI Industrial surveys are generally good indicators of future economic activity and therefore contribute to the formulation of the general economic scenario to access the pound.

The public sector net debt is Wednesday at 10:30 p.m. Loans were -3.26 billion in October. Total government indebtedness has fallen in recent years.

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GBP / USD exchange rates on winning banks: Get up to 5% more exchange rate using a specialized provider to get close to the real market rate and avoid the scarce spreads charged by your bank when providing currency. To know more On here


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