Trading Outlook – GBP/USD

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Originally updated: 07:00

Trading Bias: LONG

Currency pair: GBP/USD

Current Sentiment: Bullish

In today’s trading session we will be focussing on short term buying opportunities on the GBP/USD.

Fundamentals:

Yesterdays FOMC minutes displayed that overall the Fed are in favour of keeping interest rates on hold for longer and thought that removing the “patient” phrase from its forward guidance could put too much attention on the date of the first rate hike.

Markets immediately perceived the release as dovish with popular analyst opinion now seeing a rate hike September rather than June which had been the general consensus going into the event.

Yesterday we also had average earnings data from the UK (2.1% vs exp 1.7%) this is of importance as we have recently had commentary from the BoE stating that their primary focus when considering hiking rates is average earnings and labour data – bearing in mind that this time last year GBP/USD traded around 1.67 with the BoE being first in line to hike rates at the time.

The Federal Reserve are still very much the front runner when it comes to a time frame for tightening policy, however with the recent dovish tone from the Fed and hawkish tone from the BoE we could look for the pair to hit 1.56 over the coming weeks.

Technicals:

We expect this pair to rally during today’s session.

There is strong support at 1.5400 – 1.54190 which could provide trading opportunities should the price pull back. Look for the price to bounce off this level if it retraces back to it.

Remember to be aware of intra-day news as this can very often change the sentiment which makes our trade weaker. Look for any news that could be negative for this pair, which would change the sentiment to bearish for example overnight we had commentary from the BoE’s McCafferty. He stated that the current level of GBP appreciation is “slightly uncomfortable” this hasn’t weighed on the currency as of yet but be mindful of the possibility of the BoE taking cues from the Fed in their rhetoric.

Other Market Moving News:

The ECB extended their emergency liquidity assistance to Greece by 3.3 billion euros.

AUD/NZD traded at a fresh record low, after S&P said the Australian budget, due in May 2015, would be vulnerable to risk overseas which could risk the country’s AAA rating.

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