Pound Gains As Measures Are To Be Lifted

Jul 06 21, 11:28 GMT

The pound tended to gain against the USD, EUR, JPY and CHF yesterday as the prospect of lifting social distancing measures in the UK, tended to provide support for the sterling yesterday and during today’s Asian session. According to Bloomberg, UK’s Prime Minister Boris Johnson announced the planning to lift social distancing rules and end capacity limits at venues in England from July 19, saying that people must learn to live with coronavirus. Face masks are no longer to be mandatory but be made voluntary in all settings, while working from home instructions are also to be lifted, all businesses are to open, including nightclubs, and no proof of vaccination or testing before entry is to be required. At the same time, it should be noted that the services sector final PMI reading for June was better than the preliminary reading and also tended to improve the outlook for UK’s economy as it would imply that economic activity expanded faster than expected in the crucial services sector. Fundamentals could take the lead for the direction of the pound and if optimism remains the key feature, the pound could strengthen further.

GBP/USD gained somewhat yesterday breaking the 1.3845 (S1) resistance line now turned to support. We tend to maintain a bullish outlook for cable as an upward trendline seems to be forming since the 2nd of June. We note that the RSI indicator below our 4-hour chart is between the reading of 50 and 70 which may imply that the bulls are somewhat in charge. Should the buyers continue to guide GBP/USD, we may see the pair aiming if not breaking the 1.3990 (R1) resistance line. Should a selling interest be displayed by the market, we may see the pair breaking the 1.3845 (S1) support line and aim for the 1.3670 (S2) support level.

AUD rises while RBA Interest rate decision fails to impress

The Aussie was on the rise yesterday against the USD and during today’s Asian session yet gains seemed to be capped as RBA’s interest rate decision failed to impress traders, while its New Zealand counterpart seems to be on the rise as well as an earlier rate hike may be possible. As was widely expected the RBA remained on hold keeping rates at 0.10% while the bank decided to “retain the April 2024 bond as the bond for the yield target and retain the target of 10 basis points”. There is a tone of optimism in Governor Lowe’s statement though as the bank estimates that the economic recovery in Australia is stronger than earlier expected and is forecast to continue. We highlight RBA Governor Lowe’s press conference later on and should he maintain the optimistic tone we may see the Aussie advancing further and vice versa, given also that the bank’s bond buying program is to be reviewed in November.

AUD/USD rose substantially yesterday breaking the 0.7530 (S1) resistance line, now turned to support. We tend to maintain a bullish outlook for the pair as long as the pair’s price action remains above the upward trendline incepted since the 2nd of July. It should be noted that the RSI indicator below our 4-hour chart is between the readings of 50 and 70, which could imply that the bulls have an advantage, while at the same time may also imply that the bulls have room for further advancements. Should the bulls actually maintain control over AUD/USD’s direction as expected, we may see the pair breaking the 0.7595 (R1) resistance line and aim for the 0.7665 (R2) level. Should the bears take over, we may see the pair reversing course, breaking the prementioned downward trendline, the 0.7530 (S1) support line and aim for the 0.7465 (S2) level.

Other economic highlights today and the following Asian session:

Today we note Germany’s industrial orders, UK’s construction PMI reading both for June, Germany’s ZEW indicators for July and from the US we get the ISM non Manufacturing PMI for June. On the monetary front we note RBA Governor Philip Lowe and ECB Vice President Luis De Guindos which are scheduled to speak.

GBP/USD H4 Chart