British pound, GBP/USD, US dollar, USD/JPY, Crude oil, gold – Topics for conversation

  • The British pound is in uncharted waters, plunging to new depths
  • The US dollar is rising against all currencies today
  • Central banks can play a bigger role in currencies. Will this affect GBP/USD?

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The British pound is trading at levels not seen since the end of the Bretton Woods monetary system in 1972. The US dollar continues to rise as assets perceived as safe havens are sought.

Sterling tumbled again on Monday after Friday’s mini-budget raised questions in the market about Britain’s financial position after a big tax cut was announced.

The rapid fall has led to speculation that the Bank of England may be forced to act in one way or another, be it fiddling with interest rates or physically entering the foreign exchange market to buy GBP/USD.

It traded at an all-time low of 1.0354, versus 1.0847 on Friday.

Last week there was an intervention by the Bank of Japan, when they bought USD/JPY for the first time in 24 years. Today, Japanese Finance Minister Shunichi Suzuki said: “We are deeply concerned about the speculative moves and our position has not changed and we will respond as necessary.”

USD/JPY returned above 144 on Monday and a move above 145 will be closely watched by the market for the BOJ’s reaction.

The Big Dollar is strong across the board, hitting a 20-year high vs. Euro.

Stock markets remain largely underwater as recessionary risks appear to be factored into stock markets. Hong Kong’s Hang Seng and the broader Chinese CSI 300 index are slightly higher after Covid-19 restrictions eased somewhat.

Commodities were caught by storm, with WTI futures nearing US$78 a barrel and Brent falling below US$86 a barrel. Gold is slightly lower, trading below US$1,640.

Today, Asian Treasury bond yields are 3-6 basis points higher across the curve.

​​​​​​While the data may be thin today, there are plenty of central bank speakers from the ECB, BoE and Fed that will be making headlines.

The full economic calendar can be viewed here.

Recommended by Daniel McCarthy

How to trade GBP/USD

TECHNICAL ANALYSIS GBP/USD

GBP/USD is in uncharted territory, having never traded this low since the currency was launched in 1972.

Not surprisingly, the bearish momentum signals are strong and could indicate the possibility of further weakening.

The formation of a bearish triple moving average (TMA) requires price to be below the short term simple moving average (SMA), the latter should be below the medium-term SMA, and the medium-term SMA should be below the long-term SMA. All SMAs must also have a negative gradient.

Looking at any SMA combination, the criteria for a TMA in GBP/USD has been met.

Resistance may be at breakout points at 1.1405 and 1.1414.

The chart is created in TradingView

— Posted by Daniel McCarthy, DailyFX.com Strategist

To contact Daniel, use the comment section below or @DanMcCathyFX on Twitter

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