Sterling pairs get a volatility boost from the BOE and global risk sentiment leans to negative, making this simple setup on GBP/USD one to watch for on the session.
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
| DAX: 11083.44 -2.13% FTSE: 7128.48-0.62% S&P500: 2710.02 -0.79% DJIA: 25213.60 -0.70% |
US 10-yr 2.668% -0.039 Bund 10-YR 0.114% -0.05 UK 10-YR: 1.176% -0.017 JPN 10-YR: -0.021% -0.007 |
Oil: 53.13 -1.63% Gold: 1313.70 -0.05% Bitcoin: 3364.98 +0.06% Etherium: 103.43 +0.13% |
Fresh Market Headlines & Economic data:
- U.S. weekly jobless claims fall from one-and-a-half-year high
- German Industrial Production Unexpectedly Declines In December
- ECB sees slower growth momentum ahead
- EU Slashes Growth Forecasts and Warns Over Brexit, China
- UK and EU locked in Brexit stalemate after Theresa May and Jean-Claude Juncker refuse to budge in crunch talks
- UK housing market experiences new year chill
- Bank of England sees weakest outlook for the UK since 2009 amid Brexit uncertainty
- Bank of England’s Carney speaks after leaving rates on hold
- The Leading Economic Index in Japan decreased to 97.90 in December from 99.10 in November of 2018
- SNB Foreign currency reserves at 741B vs. 729B previous
- Oil prices drop on rising US crude supply, but OPEC cuts support
Upcoming Potential Catalysts on the Forex Calendar:
- U.S. Consumer Credit data at 8:00 pm GMT
- Japan Bank Lending Data (Ex trusts) y/y at 11:50 pm GMT
- Fed’s Bullard speaks in Saint Cloud Minnesota at 12:30 am GMT (Feb. 8)
- Canada Employment report at 1:30 pm GMT (Feb. 8)
What to Watch: GBP/USD
A lot going on in the forex markets today, with the main focus likely being the slew of weak economic signals coming from Europe and the U.K. We’re seeing a broad risk-off theme of lower equities, commodities, and falling bond yields, which makes the U.S. dollar attractive for the session.
Pairing that idea with the volatility pop in Sterling off of the latest monetary policy event from the Bank of England (no changes to policy and warned of risks to economy), and we think GBP/USD is the one to watch for the Thursday session.
Looking at price action, we can see the pair has been in a downtrend over the past week, but the market spiked higher after the BOE event to bring Cable up to a strong area of interest around the 1.3000 to 1.3050 area. This area held as minor support at the end of January, and using the Fibonacci retracement tool, we can see it lines up with the 61% Fib retracement of the swing move from 1.3160 to 1.2860.
Cable bears should be on the watch for a potential play around the 1.3000 – 1.3050 area, especially since a stop right above the Fibs and targeting the recent swing lows makes for a great potential R:R.
Cable bulls should be on a look out for a break above the 1.3050 handle on any positive Brexit news or maybe even surprise negative US news before even thinking of playing this pair long given today’s market drivers.
