Saturday, April 21, 2018
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GBP/USD looking to mount 1.40 once again
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  • Sterling continues to push for more, trying to make headway into 1.4000.
  • A light macro calendar still sees event risks from SNB, EU CPI.

The GBP/USD is stuck to the ceiling in Asia trading, testing into 1.3980 ahead of the European market session.

The Sterling has remained surprisingly resilient in the face of risk-averse market conditions and continues to keep pushing despite still drifting off of January’s high. This week may present a new scenario for the GBP/USD going forward thanks to the possibility of a Brexit deal between the UK and the European Union (EU) being announced later this month; the post-Brexit landscape has been casting a shadow over the Pound for some time, with a lack of clarity on the regulatory changes to come following Britain’s separation from the EU clouding the GBP’s future. The March 22nd-23rd EU Leaders’ Summit is expected to bring with it a Brexit transition deal, and Brexit appears to have stopped dragging on the GBP/USD for now.

Further boosting the Sterling this week was the quarterly budget report which showed a sunny outlook on the UK’s economic growth moving forward, and the Bank of England (BoE) is primed to begin lifting interest rates in small increments, with many anticipating a rate hike by this May.

The macro calendar this week has been thin and little data remains to be seen, though we will see the US Jobless Claims and the Philly Fed Manufacturing Survey at 12:30 GMT. Continuing Jobless Claims are expected to post at 1.90M versus the previous 1.87M, and the Fed manufacturing survey is forecast at 23.0 versus the previous 25.8. Some form of an economic slowdown for the first quarter of 2018 has been on the cards for the US, but a wide miss could sap some positivity out of the markets, and a wide beat could also re-stoke inflation fears and send risk assets lower in a brisk flight to safety.

Some knock-on volatility may be expected on today and on Friday as well: the Swiss National Bank (SNB) will be posting their latest Interest Rate Decision at 08:30 GMT, and Friday sees Eurozone CPI with the year-on-year figure expected to hold steady at the previous reading of 1.2%. With the SNB currently holding rates at -0.75%, any major upsets for either figure could send markets whipping and drag the GBP/USD along for the ride.

GBP/USD Technicals

Despite the Sterling’s insistent bidding upwards, the pair is still drifting on Daily candles, and the 34 EMA continues to be more of a sinkhole than support. The H4 chart has been laying down higher lows to gear up for a run higher, but February’s peaks represent a significant roadblock as the GBP/USD struggles to make a consistent claim on the 1.4000 level. Support is currently coming from the last swing low at 1.3925 and the 50.0 Fibo level at 13850, while resistance rests nearby at the 1.4000 major psychological handle and February’s last peak of 1.4070.

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