Forex Trading Library

Cable (GBP/USD) hit 5 year low

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Taking a glance across the markets, the risk appetite noticeable went down at the end of Friday’s trading session, keeping currencies such as the cable around 5-years lows.

The GBP/USD major traded on Friday around -0.5%, in the 1.4343 area, reaching also the multi-year low at 1.4339. The bearish tone in the market keeps pressure over the GBP/USD as it gives up higher yielding currencies (the GBP) in favor of safe-havens (such as YEN) in the sell-off triggered by the decline in oil prices below the $30 per barrel threshold. If two months ago we referred to the $40 threshold as a psychological one, we can now push the bar at the $30 threshold and maybe even lower depending on the global developments.

[Tweet “The GBP/USD traded on Friday  -0.5%, in the 1.4343 area, reaching the multi-year low at 1.4339”]

Reviewing Cable (GBP/USD) from a technical point of view, the immediate resistance is set at 1.4400/09 (rounded 1h50 SMA – Simple Moving Average) above which commences the test area of 1.4432/33 (5-DMA – Daily Moving Average, and 1h 100 – SMA). On the other side, supports are set at the May 2010 lows: 1.4300/1.4230.

Meanwhile, the USD stands firm even after the US Department of Labor released a statement on Thursday according to which the number of people filing for initial jobless benefits went up by 7K in the week ending January 8th, reaching 284K from the previous reading of 277K.

Also on Thursday, the BOE’s (Bank of England) minutes raised concerns over the inflation outlook and the wage-price spread growth. BOE kept the benchmark interest rate unchanged and announced that the same asset purchase facility will remain in place in the near future though setting new trading scenarios for Cable.

[Tweet “#BOE’s minutes raised concerns over the #inflation outlook and the wage-price spread growth”]

The interest rate was maintained at 0.5%, at the same level since March 2009, while the asset purchase program regarding assets financed by the insurance of the central bank reserves at 375 billion pounds. The minutes also showed that there were 8 votes against moving up the monetary policy rate and 1 in favor, as the markets expected. The single vote belonged to no other than Ian McCafferty, who voted for a 25 basis point upbeat in the rate, pushing it to 0.75%. The fifth consecutive month, he was the single member of BOE’s committee who is dissenting. Regarding the asset purchase program, all members were in favor of keeping it unchanged and maintaining it at 375 billion pounds.

Further pressure on the pound is coming from Moody’s Investor Service which, based on its most recent analysis, cautioned the UK that it might put in danger their credit rating if the upcoming referendum in the country regarding the “in-out EU” will result in favor of the nation leaving the institution. The Brexit implications continue to weigh heavily on the Sterling, being likely to prevent the Cable to rally too much in the period prior to the vote.

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