GBP OnThe Rise As Pandemic’s End In Sight

Feb 23 21, 11:06 GMT

The GBP seems to continue its rise against the USD, EUR,JPY and CHF as the UK has started plans on lifting the restriction measures. It’s characteristic that UK’s PM Johnson stated that the end of the pandemic is “in sight”, providing further confidence in the markets. Johnson explained a detailed four step plan to reopen schools on March 8th , outdoor activity mid-April and sports stadiums mid-May, while from June 21st all remaining businesses could resume operations and rules regarding social contact are to be stopped. The plan though depends largely on the path of the pandemic and should the infection rate surge once again restrictions will have to stay. If optimism continues to guide pound traders, we may see the pound gaining ground, while also the release of December’s employment data could be eyed.

GBP/USD continued to rise yesterday yet stabilised during today’s Asian session between the 1.4145 (R1) and the 1.3990 (S1) levels. We tend to maintain a bullish outlook as long as the pair remains above the upward trendline, which steepened since the 4th of February. It should be noted though that the RSI indicator below our 4-hour chart, remains at the reading of 70 confirming the dominance of the bulls on the one hand while may also imply that cable’s long position maybe somewhat overcrowded and a correction lower could be in the cards for the GBP/USD. Should the pair find fresh buying orders along its path we may see GBP/USD breaking the 1.4145 (R1) resistance line and start aiming for the 1.4345 (R2) level. Should a selling interest be displayed by the markets we may see cable breaking the 1.3990 (S1) line and aim for the 1.3835 (S2) level.

RBNZ to remain on hold with a dash of optimism

Tomorrow during the Asian session, we get from New Zealand RBNZ’s interest rate decision (01:00, GMT) and the bank is widely expected to remain on hold at 0.25%, while NZD OIS imply that the market may have almost fully priced in such a scenario to materialize. The question remains whether the bank is to extend its LSAP quantitative easing program in time, and most probably it will be keeping it unchanged. More or less, we expect the bank to maintain a wait and see position as unemployment drops and inflation tends to timidly accelerate, improving New Zealand’s economic outlook. That could lead the bank to improve its forecasts on all three key metrics being unemployment, inflation and GDP, which could allow for a ray of optimism to be included in the accompanying statement and Adrian Orr’s press conference later on (02:00,GMT). In general, though we would expect the bank to maintain a cautious tone, stressing that any tightening of its monetary policy could be premature. Should optimism outweigh the bank’s cautiousness we may see the Kiwi getting some support from the whole event.

NZD/USD rose in the past days, yet yesterday found considerable resistance at the 0.7340 (R1) resistance level. Despite the correction lower we still see the bulls as having a slight advantage for the time being, yet RBNZ’s interest rate decision could fundamentally alter the pair’s direction. It should be noted that the RSI indicator below our 4-hour chart is between the reading of 50 and 70, confirming the presence of the bulls, yet at the same time its downward slope tends to create some worries. Should the bulls regain control, we may see the pair breaking the 0.7340 (R1) resistance line, aiming for the 0.7395 (R2) level. Should the bears be in charge, we may see NZD/USD breaking the 0.7285 (S1) support line and aim for the 0.7225 (S2) level.

Other economic highlights today and early Tuesday:

As USD continues to weaken, today we focus on Fed Chairman Powell’s testimony before the Senate. Powell could maintain a dovish tone defending the Fed’s loose monetary policy, which could weaken the USD further. Also, BoC Governor Macklem’s speech should not be underestimated. As for financial releases, we note in the European session, UK’s employment data, Eurozone’s final HICP rate and UK’s distributive trades. In the American session, we get the US consumer confidence and just before Wednesday’s Asian session the API weekly crude oil inventories. Later on, we note Australia’s wage price index for Q4.

GBP/USD H4 Chart