Market Overview

Sterling Set To Stabilize Below 50% Fibonacci Level Ahead Of US NFP

  • The GBP/USD is trading just below 50% Fibonacci retracement line of 1.3090 after the selloff.
  • The US non-farm payroll (NFP) report is expected to see 180K new jobs added in February while wages are set to increase 3.3% y/y.
  • The US Dollar strength caused by ECB’s dovish turn and Brexit stalemate is set to be supported by the solid US labor market report.
  • The House of Commons is expected to reject the re-negotiated Brexit deal next Tuesday with a further vote on delayed Brexit set to follow.

The GBP/USD is trading little changed on the upside at around 1.3090 with the US February labor market report later this Friday and further Brexit deal re-negotiations over the weekend ahead.

The GBP/USD fell as low as 1.3068 on Thursday as the US Dollar strength emerged after the European Central Bank decided to launch further stimulus program with the third part of Targeted Long Term Refinancing Operations (TLTROs) while changing the forward guidance on rates saying it won’t change rates until the end of 2019.

The US Dollar rose as much as 1% against the Euro that fell to the lowest level since June 27, 2017, and the Dollar strength saw Sterling falling past 1.3090 representing a 50% Fibonacci retracement of the upmove from 1.1800 to a cyclical high of 1.4374.

The Brexit re-negotiations are taking place in Brussels with the European Union said to make a new offer to the UK on Brexit backstop that is likely to fall short of the UK demands. With 21 days left before the UK is expected to officially depart from the European Union, the time is tight for any structural changes while the UK House of Commons is scheduled to vote on re-negotiated Brexit deal next Tuesday. While the UK parliament is unlikely to pass the re-negotiated Brexit deal, the chances for delayed Brexit increased supporting Sterling.

Technically the GBP/USD broke below 50% Fibonacci retracement line at 1.3090 and the currency pair is tilted to the downside. The technical oscillators including Momentum and the Relative strength index are flattening out while Slow Stochastics made a bearish crossover within the Overbought territory and it is sliding lower. The most important technical feature though is the golden cross of the 50-day moving average crossing over the 100-day moving average (DMA). The golden cross is a strongly bullish technical signal that is expected to push Sterling higher long-term. In the short-term, the GBP/USD though is in corrective mode around 1.3090 before testing 1.3050 and a strong psychological support level of 1.3000. On the upside, the immediate target is at 1.3090 representing 50% Fibonacci retracement of post-Brexit recovery from 1.1800 to 1.4374 before targeting  1.3390 representing 61.8% Fibonacci retracement of the same upmove.

GBP/USD daily chart



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Posted-In: BrexitEarnings News Eurozone Forex Global Markets General