GBPUSD and UK100

The equity markets in the US continued to move higher yesterday following the recent selloff and rebound. New highs were created but European indices lagged behind as weaker Manufacturing PMIs dampened the outlook. The markets are in a positive frame of mind caught in a sweet spot between optimism that the FED will not announce a taper this week at Jackson Hole and optimism that the economy is improving. However the two are not compatible into September where one or the other will be proved incorrect. The view that the FED is walking back its taper talk came from a rise in Covid-19 cases in the US and the position that the FED would be unable to taper if cases are rising. The case number for today are indicating a new daily rise in cases but of 260,656 but medical professionals such as Dr. Gottlieb are indicating that the surge in the south of the country has potentially peaked and that the Delta variant may represent the final surge in US of Covid. US Stocks rallied higher when it was announced that the Jackson Hole event would be carried out virtually due to the rise in Covid cases. Market participants saw this as a reason to delay a taper whereas it would appear that it may just be prudent public health advice, particularly as the Delta variant is rampant in Wyoming. The State swapped its own scoring index for covid risk last week and took on the CDC’s, promptly categorizing itself as high risk and forcing the FED to take the symposium virtual or be in non-compliance with local health guidelines. However markets took this as an indication that the FED would delay its taper. What is driving the taper talk is job creation, workers returning to work and inflation. All of these metrics are still improving increasing the likelihood of a taper. Meanwhile vaccinations are continuing to rise and yesterday the US FDA approved the Pfizer-BionNtech vaccine, which could see an additional increase in vaccine take up. The Japanese 225 closed up 0.87%. The Hang Seng is trading higher by 01.85% while the Shanghai Composite is trading up 1.04%. Gold is trading at 1803.00. USDJPY is trading at 109.850.

Today UK MPC Member Tenreyro will speak in the morning. In the afternoon, US New Home Sales are expected to rise to 698K from 676K. US Richmond Manufacturing Index is forecast to decline to 25 from 27. 

GBPUSD

The GBPUSD pair is currently trading at the 1.3738 level, after it’s retesting of the February top at the 1.4250 level in early June. The pair had been moving higher in an uptrend since it located support at the 1.2676 level in September 2020 but broke below the rising support trend line in late March which is now being used as resistance. The pair pushed higher to the resistance around 1.4240, which essentially created a double top, with the neck line broken around 1.3670 and this area is still being tested.. The 1.3885 area may be resistive along with 1.3900/1.3915 zone. Resistance has been noted around 1.3940 and 1.3970. A push over 1.4000 may encounter resistance around 1.4085/1.4090 followed by the 1.4165 area. A break higher above 1.4200 may seek to re-engage the 1.4250 area. A breakout above this level may see price attempt to test 1.4280 as the trend continues. The 1.4300 area comes in play followed by the 1.4343 area. 

Support may come into play around 1.3733 and is followed by 1.3670. The 1.3600 area may also be used as support followed by the 1.3580 level. The 1.3566 level was used as support and is now an important higher low. From there the 1.3540 and 1.3500 levels may be of interest while a loss of 1.3450 opens the way to 1.3400 followed by 1.3355. Below these levels the 1.3300 area comes into play. A loss of this area may trigger selling into potential supports at 1.3270, 1.3200 and 1.3100. 

UK100

The UK 100 Index is trading around the 7131.00 area at present after recovering from its break lower to test the former highs at 6800.00/6815.00 from March and converting the area to support. The 7150.00 area may be resistive along with 7175.00 in the short term. The 7185.00/7200.00 area was resistance last week with a high at 7235.00. Beyond this level the 7255.00 area may become a target in the medium term. From there the 7325.00 area may be resistive to further advances but a break above this level may look to engage the 7400.00 area followed by the 7500.00 level.

The 7100.00 may be used as support followed by 7088.00, the 7000.00 round number and the higher low at 6928.00. The 6900.00 level, the 6815.00/6800.00 area and the 6760.00 area are being used as potential supports. The 6700.00 area and the 6645.00 area is also acting as support followed by 6616.00 and the 6600.00 levels. Under these levels 6550.00 may act as support in conjunction with the 6500.00 level and 6466.00. This is the major supporting area on the chart. In the short term support may form at the 6520.00 level followed by 6480.00. Further support may be seen at 6470.00, 6430.00 and 6400.00. A move down through this support may unravel the current rally, breaking the sequence of higher lows. 

Philip Konchar

Core Spreads

Core Spreads is financial trading as it should be. No noise – just tight spreads on thousands of markets.

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