GBPUSD and UK100

The volatility in markets sent US technology stocks lower in the move down yesterday but elsewhere, such as in Europe there was a general move higher as the pressure came off somewhat. Asian equities are presenting a mixed bag with Japan higher this morning but predictably Chinese lagging as it comes to terms with the tightening of government regulations. Quadruple witching is taking place on Friday and it has been noted that this event has created downside moves in the markets in recent months. US CPI will be released today and Retails Sales will be out on Thursday which are the highlights in the calendar this week. RBA Governor Lowe said overnight that the Covid outbreak in Australia has delayed, not derailed the economy. He said that the cash rate is unlikely to rise before 2024 due to the sluggish wage growth. He said it was difficult to understand why markets are pricing in rate hikes for 2022 and 2023. He said that rates may rise in other countries but Australian domestic factors are different. He commented that the board judged that fiscal policy was the best response to the current delta lockdowns and there is little that monetary policy could do to offset hit to demand in Q3 and Q4. He said that the extension in bond buying until February reflected the delayed recovery. He commented that the outbreak is a significant setback, an added element of uncertainty and Q3 GDP is likely to shrink by at least 2%, with risk contraction which could be significantly larger. He did say that he expects the economy to be growing again in Q4, with the recovery continuing into 2022. He said that spending should be supported by higher saving and a boost to household wealth from house prices. He noted that low-interest rates have contributed to higher house prices and house affordability is best not addressed by higher rates or curbs on lending. He added that Australia has made significant progress on the vaccination front and the main downside risks are new Covid-19 outbreaks and new strains of the virus. The Japanese 225 closed up 0.73%. The Hang Seng is trading lower by -1.42% while the Shanghai Composite is trading down -1.44%. Gold is trading at 1793.00. USDJPY is trading at 110.030.

Today US CPI is forecast to fall to 0.4% from 0.5%. US Core CPI is forecast to remain at 0.3%. 


The GBPUSD pair is currently trading at the 1.3858 level after its 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 was used as resistance in May. The current consolidation is taking place around 1.3800. 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 pushover 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 be seen around 1.3800. Further support might 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. 


The UK 100 Index is trading around the 7050.00 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 index is continuing to consolidate and trade sideways between support and resistance. Near-term resistance may show up in the 7100.00/7125.00 zone. The 7185.00/7200.00 area may form resistance with the current 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 7000.00/6993.00 may be used as support followed by 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

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