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Key Highlights

• The British Pound climbed to 1.3380 before correcting lower against the US Dollar.
• A major bullish trend line is formed with support at 1.3060 on the 4-hours chart of GBP/USD.
• The UK Rightmove House Price Index increased 0.4% in Feb 2019 (MoM), less than the last +0.7%.
• The UK Claimant Count for Feb 2019 will be released today, which could change by 2.7K.

GBPUSD Technical Analysis

After correcting lower, the British Pound found a strong support at 1.2960 against the US Dollar. The GBP/USD pair climbed above the 1.3160 and 1.3240 resistance levels to move into a positive zone

Looking at the 4-hours chart, the pair even gained traction above the 1.3300 resistance level. Besides, there was a close above the 200 simple moving average (green, 4-hours) and 100 simple moving average (red, 4-hours).

The pair traded as high as 1.3381 before starting a downside correction. It traded below the 23.6% Fib retracement level of the last wave from the 1.2960 low to 1.3381 high.

However, there are many supports on the downside near the 1.3170 level and the 50% Fib retracement level of the last wave from the 1.2960 low to 1.3381 high. The main support is near the 1.3120 level (the previous resistance area).

Moreover, there is a major bullish trend line is formed with support at 1.3060, placed along with the 200 simple moving average (green, 4-hours). Therefore, dips in GBP/USD towards the 1.3170 or 1.3120 levels are likely to find a strong buying interest.

On the upside, an initial resistance is near the 1.3300 level, followed by 1.3320. A break above the 1.3320 level could push the pair towards the 1.3380 swing high in the near term.

Overall, there could be an extended decline in GBP/USD, but the pair is likely to find support on the downside near 1.3170 or 1.3120.

Economic Releases to Watch Today

• UK Claimant Count Change Feb 2019 – Forecast 2.7K, versus 14.2K previous.
• UK ILO Unemployment Rate Jan 2019 (3M) – Forecast 4.0%, versus 4.0% previous.
• German ZEW Economic Sentiment Index March 2019 – Forecast -11.3, versus -13.4 previous.
• US Factory Orders Jan 2019 (MoM) – Forecast +0.3%, versus +0.1% previous.

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After huge gains last week, GBP/USD has started the week with sharp losses. In Monday’s North American session, the pair is trading at 1.3194, down 0.74% on the day. It’s a light data calendar, with no British events on the schedule. In the U.S., the NAHB House Market Index. On Tuesday, the U.K. releases wage growth and claimant count change.

Brexit has reached a fever pitch, as parliament voted three times last week on Brexit. On Thursday, lawmakers voted to delay Britain’s exit from the European Union. Brexit is scheduled to take place on March 29, so an extension of Article 50 would give the May government some breathing room. However, the uncertainty surrounding Brexit is far from over. It’s unclear how long an extension the E.U. would be willing to grant, although senior E.U officials have said that a year or more would be acceptable. The E.U. will have to reach a consensus from all 27 members, each of whom must vote in favor of an extension to Article 50. Parliament remains deeply divided over Brexit, and Prime Minister May, though badly shaken, hasn’t given up on her withdrawal deal. Parliament is scheduled to vote again on May’s withdrawal agreement, but the government could pull the vote if the numbers are not there to pass the proposal. Traders should be prepared for further volatility from the pound.

In the U.S., consumer inflation remains soft, which means there is little pressure on policymakers to raise rates in the near future. In February, Core CPI edged down to 0.1%, while CPI remained steady at 0.2%. Consumer inflation remains well below the Federal Reserve’s target of 2.0 percent, so there is little pressure on the Fed to raise rates anytime soon. Policymakers have been signaling that the Fed could stay on the sidelines until the second half of 2019, and this stance was underscored by Fed Chair Powell has said that the Fed would remain patient and was in no hurry to change interest rate policy. The dovish stance of the Fed could weigh on the dollar, as a lack of rate hikes makes the greenback less attractive to investors.

Sterling is apparently troubled by more Brexit chaos and weakens broadly. Firstly, ITV's Robert Peston said it's almost 100% certain that the UK government cannot make a deal with Northern Ireland DUP, and thus there will be no meaningful vote three (MV3) this week.

But more importantly, the Common speaker John Becrow just made a surprising statement in the Parliament. Simply speaking, Prime Minister Theresa May cannot bring the "same" motion, the Brexit deal that was defeated just last Tuesday, back for another meaningful vote.

That is, the same motion, or essentially the same motion, cannot be voted over and over again. This is a necessary rule to ensure the sensible use of the house's time, and proper respect for what it decides.

Key quotes from John Bercow’s opening statement:

"If the government wishes to bring forward a new proposition that is neither the same nor substantially the same as that disposed of by the House on March 12, this would be entirely in order.

What the government cannot legitimately do is resubmit to the house the same proposition - or substantially the same proposition - as that of last week, which was rejected by 149 votes.

This ruling should not be regarded as my last word on the subject. It is simply meant to indicate the test which the government must meet in order for me to rule that a third meaningful vote can legitimately be held in this parliamentary session."

Cable holds slightly above daily low at 1.3220 in early American session trading on Monday, after the action was capped at 1.3300 in Asia and fresh acceleration lower commenced on comments about MV3, by Boris Johnson in early European session. Monday's action is firmly in red, with risk of further easing on bearish technical studies. Focus turns towards UK Parliament's meeting, due later today, when procedures for extending negotiating period if UK PM May's plan is rejected on MV3, scheduled later this week, but also possible to be held after EU summit on Thursday Another negative signal for pound could be increase of quotes against plan's approval, betting companies announced today. Bearish scenario would include acceleration through solid supports at 1.3179/64 (converging 10/20SMA's) and risk retest of 200SMA (1.2986) if results strongly weaken the sentiment.

Res: 1.3229; 1.3300; 1.3330; 1.3349
Sup: 1.3202; 1.3179; 1.3164; 1.3074

WTI oil accelerated above $59 barrier on Monday and posted new 2019 high at $59.14, maintaining strong bullish sentiment and signaling continuation of larger uptrend from $42.36 (24 Dec low) after two-day pause, marked by double-Doji on Thu/Fri. Fresh boost to oil prices came from promise of world top exporters, led by Saudi Arabi and Russia, to increase compliance with their production cut agreement, which aims to stabilize global oil market. So-called OPEC+ group committed to reduce production by 1.2 million bpd, in attempts to reduce oversupply and further tighten oil markets. Last week's strong advance (4.2%) and weekly close above previous high at $57.85, dented $59.00 round-figure resistance and opened way for test of targets at $59.62/$60.00 (50% retracement of $76.88/$42.36 / psychological), violation of which would unmask 200SMA ($61.85). Bullish setup of daily MA's supports the action, but sideways-moving momentum and slow stochastic, with the latter being strongly overbought, warn that bulls may face strong headwinds from $59.62/$60.00 barriers and the price may ease on failure to break higher in initial attempt. Rising 10SMA ($57.29) is expected to contain corrective dips and keep bulls intact.

Res: 59.14; 59.62; 60.00; 61.27
Sup: 58.93; 58.27; 57.85; 57.29

Markets

Global core bonds gyrated around opening levels in today’s uneventful opening session to the trading week. Sparse economic data printed near consensus. The Bundesbank’s warning that it might take longer for growth to rebound hung in the balance with upwardly oriented stock and oil markets. Today’s main message is that investors are counting down to Wednesday’s Fed meeting, resulting in low volume action. We expect the Fed’s new dot plot to show one more rate hike this year and that’s it. The median FOMC estimate in December suggested 2 hikes this year followed by another one in 2020. Markets currently discount a rate cut in 2020. Fed chair Powell is expected to announce the end to the BS run-off by the end of the year. The German yield curve bear flattens slightly with yields rising by 1.3 bps (2-yr) to 0.1 bp (30-yr) higher. US yield add 0.3 bps to 0.7 bps across the curve. 10-yr yield spread changes vs Germany narrow by up to 6 bps. Italy and Portugal outperform after rating agency Moody’s decided not to downgrade the Italian Baa3 credit rating or outlook last Friday (after trading) while S&P lifted the Portuguese BBB- rating by one notch to BBB (stable outlook).

Economic data was only of secondary importance for trading today. Instead, most currency price actions were sentiment and technical driven. The euro was well bid, profiting from early risk on support following a strong Asian session. A weak(er) dollar in the run-up to Wednesday’s soft expected Fed meeting sent EUR/USD further north to an intraday high close to 1.136. The pair retreated during the first US trading hours, but holds on to most of today’s gains. EUR/USD is currently changing hands at 1.134, up from 1.1326. USD/JPY is trading virtually unchanged at 111.56 while EUR/JPY gains ground (126.55), highlighting today’s rather soft dollar.

Premier May pushed for support from the DUP and some rebel Tory members to her deal in a possible third ‘meaningful’ vote (tomorrow). Their backing is essential to May, who repeatedly said to first assess chances of winning before presenting her deal again. Tory hardliner and brexit ‘poster boy’ Rees-Mogg said today that he (and with him some other brexit Conservatives) would do so conditional on DUP’s support for the deal, rather than risk a stay in the EU. May’s attempt to convince her Northern Irish allies have yielded no concrete results so far but talks were labelled “constructive” and are ongoing. Investors took a cautious stance vs. the pound given the high amount of uncertainty and after the strong rally last week. EUR/GBP rebounded from the 0.85 short term resistance area back to 0.857. Cable kicked off today close to 1.33 but edges lower to 1.323 currently despite dollar weakness.

News Headlines

The US NAHB housing market index stabilized at 62, near consensus of a slight pick-up to 63. The NAHB chairman said that builders report the market is stabilizing following the slowdown at the end of 2018 and that they anticipate a solid spring home buying season.

The Bundesbank expects German economic growth to remain subdued in Q1, dragged down by weak industrial production, falling export car demand and deteriorating manufacturing sentiment. The German central bank thus gives up on the idea of a Q1 rebound. Construction and private consumption should support growth amid a strong labor market and rising disposable income.

The Belgian debt agency conducted its first regular bond auction of the year. It successfully tapped OLO 82 (€ 0.76bn 0.5% Oct2024), OLO 87 (€1.29bn0.9% Jun2029) and OLO 86 (€96bn 1.25% Apr2033). The combined amount sold was the maximum of the eyed €2.5-3bn. The auction bid cover amounted to 2.03. Belgium currently already raised 50% of this year’s total OLO funding need (€28bn). 

WTI crude oil's rally resumes today and reaches as high as 59.46 so far. It's now very close to key resistance zone around 60 psychological level. There are also 50% retracement of 77.06 to 42.05 at 59.55 and 55 week EMA at 59.25. For now, we do not expect a firm break of this 59.25/60.00 resistance zone. Bearish divergence condition in 4 hour MACD should also limit upside momentum. Break of 57.96 will indicate short term topping and bring pull back to 54.72 support. However, sustained break of 60 will pave the way to 61.8% retracement at 63.68 next.

BTCUSD is currently developing below the two-month high of 3994.20 and back near the flat red Tenkan-sen line. According to the momentum indicators some weakness could emerge as both the RSI and the Stochastics are losing steam after a peak in the overbought territory.

Should the price extend higher, it could find immediate resistance at the 3994.20 level before touching the 4085 barrier, taken from the peak on January 8. Also, an advance above this region would increase speculation that a bullish move is in progress towards 4210, where the market topped on December 24.

On the other hand, should the bitcoin stretch south, immediate support could come from the 3900 inside swing and then closer to the 20- and 40-simple moving averages (SMAs) currently around 3850 in the 4-hour chart. A step lower could drive the price down to 3832.72, where the 23.6% Fibonacci retracement level of the upleg from 3313 to 3994.20 coincides with the rising trend line.

To sum up, the very short-term risk is tilted to the downside, though the upward extension off 3313 hints that buyers are still active in the market.

US NAHB housing market index is unchanged at 62 in March, missed expectation of 63. NAHB noted that "builders report the market is stabilizing following the slowdown at the end of 2018 and they anticipate a solid spring home buying season".

And, "in a healthy sign for the housing market, more builders are saying that lower price points are selling well, and this was reflected in the government's new home sales report released last week."

Full release here.