GBP continues to suffer
The GBP continues to receive punishment from the risk-off trading environment and continual financial volatility. The Construction PMI for the UK was released below expectations on Wednesday, which could have weakened sentiment even further or at least prevented the GBP from recovering losses. Although the outlook for the UK economy remains robust, investor sentiment is clearly weak at present and the risk-off trading environment is a major reason for this. This may subside with time, but as of now the technical indicators on the Daily timeframe suggest that the GBP is still exposed to further losses.
Today the Shanghai Composite Index is closed, due to the World War II 70th anniversary commemorations in China, and as such the focus in today’s session may be shifted to the Pound, Dollar and Euro. In the European session, the latest Services will be released for the United Kingdom
The main focus today will be later in the day when not only will the ECB interest rate decision be released, but also the weekly initial jobless claims from the United States. The tension caused by the ECB being unable to fulfil its 2% inflation target continues to linger through the markets, and market participants are expecting to receive some indication on how the ECB may rectify this situation. In regards to the USD, a solid decline in unemployment claims should keep hopes alive of a Fed rate hike before the end of 2015.
GBP weakness caused by the risk-off trading environment has made the GBPUSD bearish on the daily timeframe. The candlesticks reside below the 20 SMA and MACD has crossed to the downside. Previous support at 1.5350 may become resistance, which may send prices to the next relevant support at 1.5200.
This pair is technically bearish. Since the hefty decline in the final weeks of August, prices have ranged with support at 1.4650 and resistance at 1.4900. A solid breach below the 1.4650 support may open a path to the next relevant level at 1.4450.
The risk-off environment has provided the JPY with consistent strength. This pair remains bearish as long as prices can keep below the previous lower high of 187.50. The old support at 185.00 may act as new resistance which may send the GBPJPY to 181.00. Leading and lagging indicators concur with this scenario as they point to the downside.
Falling oil prices and the recent news that Canada has entered a recession has promoted CAD weakness, but weakness can also be seen on the GBP which has been caused by the risk-off environment. The GBPCAD may turn technically bearish on the daily timeframe when there is a daily close below the 2.010 support. A move back above 2.050 invalidates this daily bearish outlook.
The AUD has taken a hit due to the global decline in commodities. Technically the GBPAUD is bullish. Prices are above the 20 SMA and the MACD has crossed to the upside. As long as the support at 2.150 holds, there may be a further incline to the next relevant resistance at 2.210.
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