Carry Trade Unwinding Still Dominates, Sterling Hammered
The Japanese yen strengthens across the board again in early US session. Today’s price actions seem to target sterling indeed, where there are over 300 pts fall in GBP/JPY to 226 level, 200 pts fall in GBP/CHF. GBP/USD also tumbled to 1.9429 support too. While EUR/JPY also dropped another 100 pts and to 153 level and is set to test key near term support of 153.67, EUR/USD was supported by cross strength in EUR/GBP and remains steady so far.
Fed Poole said this morning that his views on the economy are unchanged by recent data and events. He does not expect the US economy to enter recession. Also Poole expects Fed can keep inflation low for years, regardless of oil. No important economic indicator is scheduled to release today with the exception of U of Michigan consumer confidence survey which is expected to be at 93.5 in Feb. However, it’s not expected to change the current sentiments in the markets. The Yen will likely remain strong while Sterling will continue to be under pressure.
GBP/USD
Daily Pivots: (S1) 1.9540; (P) 1.9595; (R1) 1.9636;
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Cable falls sharply early US session and reached mentioned 1.9429 as expected. Break of 1.9429 indicates the whole consolidation from 1.9400 should have completed at 1.9672 already and the decline from 1.9913 should have resumed. At this point, intraday bias remains on the downside as long as cable stays below 1.9516 support turned resistance and further fall is expected to follow towards 1.9237/61 cluster support (23.6% retracement of 1.7047 to 1.9913 at 1.9237). Touching of 1.9516 will turn intraday outlook consolidative first.
In the bigger picture, bearish divergence conditions are being displayed in weekly RSI, daily MACD and RSI already, suggesting that the whole up trend from 1.7047 might have completed before reaching mentioned 2.0106 cluster resistance (1992 high, 100% projection of 17047 to 1.9024 from 1.8090 at 2.0067). Focus is still on 1.9237/61 cluster support. Decisive break of 1.9237/61 cluster support will add much weight to the case that whole medium term up trend from 1.7047 has already completed much deeper decline should be seen towards next cluster support at 1.8834 (38.2% retracement of 1.7047 to 1.9913 at 1.8818) first.
Strong rebound from 1.9237/61 cluster support or break of 1.9731 resistance will indicate that the corrective fall from 1.9913 is merely correction to the rise from 1.8517 only and cable could make another high above 1.9913 and attempt to meeting 2.0106 cluster resistance before having a medium term reversal.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
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