GBP Strength Continues May 12, 2015
GBP Still Riding Strength Off Election Results
The GBP strength is more than likely going to continue after yesterdays push. They have shown considerable daily conviction and as Bloomberg notes, the only thing that could slow the GBP rise is a disappointing Inflation Report later this week. I suspect the hunch is correct below and ant daily conviction above 1.5622 and we are more likely to see a test to 1.5750 or higher.
Investors are awaiting the BOE’s Inflation Report on Wednesday, which will be the first comment from officials after an election-campaign purdah.
“The fear is that fiscal austerity could lead to a sustained growth underperformance which will delay and temper the extent of BOE tightening,” said Valentin Marinov, head of Group-of-10 foreign-exchange research at Credit Agricole SA’s corporate and investment-banking unit in London. “My hunch is that the BOE will maintain a fairly constructive view on the U.K.’s longer-term inflation and growth outlook. The pound could extend its gains in the wake of the Inflation Report.”
EUR/USD Still Weak, Slowing Around Hourly 200 EMA
The EUR/USD did make an attempt at another push down yesterday but seems as though they are waiting for something to happen with Greece before they commit on the longer pushes. At this point I will still be somewhat bias for the short and expect them to finish the third push today. I don’t see much for bottoming but there is a slight chance they turn it up from yesterdays lows if we get any good news on the Greek situation. The best level to short is up at 1.1191 but I have my doubts it will reach there if they are to continue down today. The 1.1160 is also valid at at the Asian high and having the hourly 200 for confluence adds probability as well. I will still be somewhat open for a long with a stop run to the lows but need to see something clear to change my bias.
GBP/USD Holds Bottoming After Election Push
As I mentioned above the GBP strength is more likely to continue but I should also say that with the extended moves they could run a deeper pullback at any time to flush out weak holders. Therefore I wont have a strong bias for this pair. The best level for the long right now is at 1.5514 but a test to the psych 1.5500 wouldn’t surprise me if the push that far. Otherwise the Asian lows will be valid although I prefer them to push the range a little wider. I will be open for a short at yesterdays highs but a stop run showing they cant find buyers above the daily high at 1.5622 would be best.
EUR/JPY Showing Two Extended Pushes
The two pushes marked on the EUR/JPY are over extended so I wont be treating it as a short only day as I typically would. I do expect the Euro to remain weak but as with the EU any good news on a Greek deal could change that. The best level to short is up at 134.16 but they may hold it lower at the Asian highs. If we do get good news on Greece then they will most likely show some conviction above yesterdays highs so I will look for a backside long if that happens.
Forex News Today
The calendar starts off with UK Industrial and Manufacturing Production. The higher impact Manufacturing figures are expecting a small drop but being so close to zero there is a decent chance for a drop below which should bring some GBP weakness. Otherwise any surprise upward will help with continued GBP strength. Later is the UK NIESR GDP Estimate which also has potential to add fuel to a move on a bigger miss.
The US does have a Fed member speech to keep an eye on but I dont expect much considering they have been pretty quiet lately.
Asian session traders have Chinese Industrial production that has potential to get the Aussie moving tomorrow.
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