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Dec 08 - 08:55 PM

GBP/USD - COMMENT-Charts And 'Plan B' Suggest Further Sterling Losses

By Andrew M Spencer  —  Dec 08 - 07:30 PM

The pound fell 0.3% on Wednesday, while EUR/GBP jumped 1% to the highest levels since late September, despite broad-based U.S. dollar weakness with further sterling losses viable, as 'Plan B' and the technical outlook weigh.

PM Johnson imposed a 'Plan B' limited lockdown to fight the fast spreading Omicron variant nL8N2ST2N8.
Booster shots are being rolled out, which should have a positive influence on hospital admissions nL1N2ST20L, but Johnson's measures nL8N2ST5TA will weigh on the economy as a whole.

BOEWATCH priced the chances of a 25pt rate rise to 0.35% at 33% on Tuesday, which tightened to 27% on Wednesday.
It would now be a major surprise for the BoE to raise rates on December 16th, while the statement is unlikely to have a significant hawkish tone, as limited lockdowns return and the Omicron variant spreads.

Technically 5, 10 & 21 daily and weekly moving averages head south with the 21-day Bollinger bands, which is a strong bearish setup.
A close above 1.3265 10-day moving average would flag caution for the trend, while a close above the 1.3339 21 DMA would end the downside bias.

1.3166, 38.2% of the 2020-2021 rise held on the close Wednesday, but remains vulnerable.
A break would target 1.2830/50, range support in October, November 2020 and 50% of 2020-21 rise.

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Source:
Refinitiv IFR Research/Market Commentary

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