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GBP/USD: Preparing For Potential Short Squeeze Scenario

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Dear Traders,

After the absence of a major driver or catalyst in the markets, today is loaded with market-worthy data and thus, traders are bracing for higher volatility in most major currency pairs. Top event risk will be the Bank of England rate decision with the BoE’s Quarterly Inflation Report. While the BoE is unlikely to raise interest rates at this meeting, it is the inflation report and the press conference with BoE Governor Carney that garner most attention.

The Bank of England will announce its rate decision alongside the release of the central bank’s inflation report at 11:00 UTC. The press conference will follow 30 minutes later.

Following the complete U-turn in rate hike expectations out of the BoE, the central bank has little choice but to signal a rate hike in August to maintain the bank’s credibility. The risk is therefore tilted to the upside with a potential short squeeze scenario in the GBP/USD. If the BoE, however, disappoint in terms of rate hike speculation deviating from their hawkish bias, the pound will further fall.

Another, no less important, report will be the April Consumer Inflation Report (CPI) from the U.S., which is due shortly after the BoE’s decision at 12:30 UTC. The Federal Reserve debate over a fourth rate hike in 2018 is still ongoing, which is why inflation figures could affect current rate hike speculation. Thus, a surprise in CPI data could have a major impact on the dollar, paving the way for some profit-taking or maybe an extension of the dollar rally.

Let’s take a look at the technical picture:

GBP/USD

The cable traded consolidated between roughly 1.36 and 1.35. The short-term bias is slightly bullish, with the focus now being on an uptrend channel between 1.3615 and 1.3515.  A break above 1.3810 could open the door for accelerated bullish momentum towards 1.40. On the bottom side, the 1.35-support remains a crucial price barrier. If the pound drops below 1.3480 we may see a drift towards 1.3330.

EUR/USD: The euro still trades around the falling trendline of its recent downtrend channel. As mentioned in yesterday’s analysis, the 1.19-barrier could prove an important hurdle for euro bulls now. A break above 1.1910 may encourage bulls for a test of 1.1950. Today’s price action will, however, hinge on the appetite for USD, which is why we focus on U.S. CPI data.

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GBP/USD: How High Can The Pound Go?

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Dear Traders,

Markets have had a surprisingly volatile start after the Easter holidays as the shock news of a U.K. election has caused the British pound to skyrocket against the U.S. dollar. The euro traded in sympathy with the pound and was able to climb above the 1.07-barrier.

The biggest story on Tuesday was however sterling’s roller coaster ride amid U.K. Prime Minister Theresa May’s announcement in Downing Street. When May initially said she would make an announcement outside Downing Street, she offered no further explanation. Consequently, the pound dropped towards 1.2515 as a result of uncertainty. When it was clear that May announced an early election, the pound jumped to fresh highs, breaking through significant technical barriers. The announcement came as a surprise in the market and as a trader we know that surprise moves can be very profitable. And thus, every of our swing and daily signal trades have easily reached the final profit target.

The snap election that will be held on June 8 was called in order to increase May’s majority in the House of Commons before the difficult two-year negotiating period with the European Union.

GBP/USD

How high can sterling go? This is precisely the question that interest traders. In the near-term, we expect a continuation of the recent upward move, targeting at the next resistance zone around 1.29 – 1.2920. If sterling breaks through 1.2950 it may head for a test of 1.3050 – the upper resistance level. We expect a stronger resistance around 1.3050 and 1.31 that could limit further gains in the pound. On the downside, we see current support levels at 1.27 and 1.26, barriers at which bulls could take the opportunity to buy sterling at lower levels.

The euro broke through 1.07 and was able to hold above that important price level. We do not expect larger market moves ahead of the French elections as uncertainty prevails, but anything is possible. A next resistance is seen around 1.0750 and the single currency would need to break significantly above that level in order to extend potential gains towards 1.08. A crucial support-zone remains intact at around 1.0640/30.

Eurozone Consumer Prices are scheduled for release at 9:00 UTC but this report could be of minor importance.

Daily Forex signals:

Additional daily and long-term entries are available for subscribers.

View our daily signal alerts https://www.maimar.co/category/daily-signals/

Subscribe to our daily signal service https://www.maimar.co/signals/

We wish you good trades and many pips!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2017 Maimar-FX.

www.maimar.co