A wave of relief is sweeping across financial markets this afternoon after China’s central bank set the Yuan’s daily fixing stronger than expected, pulling the currency from an 11-year low against the Dollar.
This semblance of stability will most likely recharge global risk sentiment and revive investor appetite for global stocks, emerging market assets and riskier currencies in the near term.
The British Pound is already benefiting from the improved market mood this afternoon by appreciating against every single G10 currency excluding the Australian Dollar.
While Sterling has the potential to push higher against the Dollar and other major currencies this week, the medium to longer-term outlook remains firmly bearish. For as long as fears remain elevated over the United Kingdom crashing out of the EU with no Brexit deal, the GBPUSD is trapped on a rough and rocky ride downhill.
Technical traders will closely observe how prices behave below the 1.2200 level. Should this point prove to be reliable resistance, the GBPUSD is seen sinking back towards 1.2100 and 1.2000, respectively.
Alternatively, a breakout above 1.2200 will trigger a technical rebound towards 1.2250 and 1.2400.
Currency spotlight – EURUSD
The EURUSD remains firmly bearish on the weekly charts despite the remarkable rebound towards 1.2200 yesterday.
There have been consistently lower lows and lower highs while the MACD trades firmly to the downside. Sustained weakness below the 1.1220 level should encourage a move down towards 1.1100 and 1.1000, respectively. Should 1.1220 prove to be unreliable resistance, the EURUSD has scope to test 1.1330.
USDJPY attempts to consolidate above 106.00
The USDJPY remains firmly bearish on the week charts. Sizzling US-China trade tensions, global growth concerns and Brexit uncertainty among many other geopolitical risk factors is likely boost appetite for the Japanese Yen. A solid weekly close below 106.00 is all bears need to send prices towards 104.70.
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