GBP/USD a week ahead

The talk of a Brexit continues to impact the GBP/USD. The pair now consolidates that could see some dramatic moves in the week ahead.

The technical indicators are showing some interesting signals as the RSI Oscillator remains relatively flat, near oversold territory, despite the recent price declines. There is some divergence between the indicator and price action that could be indicating a reversal of the short term trend.
Traders have to consider for the entry of a long position above the key 1.4170 resistance level. Alternatively, a break below the 1.40 handle would indicate a sharp push towards the bottom of the channel is likely. However, be aware of any short side move as the Risk/Reward ratio is not advantageous.

The pair  is likely to wait upon the UK Manufacturing Production results before making a strong move. However, given the recent collapse in the pair’s value, the downside might be relatively limited. The most likely scenario is a sideways consolidation at the current level .

The only element

The Federal Open Market Committee (FOMC) Meeting Minutes are a detailed record of the committee's policy-setting meeting held about two weeks earlier. The minutes offer detailed insights regarding the FOMC's stance on monetary policy, so currency traders carefully examine them for clues regarding the outcome of future interest rate decisions. Last night, FOMC minutes pushed  US markets higher as the dollar dropped. The stronger greenback is making the matter difficult for USAexporters as their profit margin is constantly being squeezed. Now the weaker dollar will be a good sign for US corporate earnings.

The rebound in oil prices on the back of the crude inventory data has provided a much needed lifeline for the energy sector. However, traders are questioning whether it can last until the OPEC members meet in Doha.

 The Japanese Yen has fallen below the critical level of 110. Traders are hoping that the currency will be weaker.

The only element which may keep investors on the edge, will be the weak global growth, which could have a massive impact on the earnings.

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To strengthen the US dollar

Since the beginning of the week, the USD/CAD pair has been growing. The growth in pair started amid statements made by the Bank of Canada Governor Stephen Poloz on Monday.
Today in the afternoon, a series of macroeconomic indicators are released in the US and Canada. The US trade deficit is   widen  to $47.06 billion. On the other hand, the pair can get support if Canada posts a bigger trade deficit than in the previous month. Moreover, favorable data on ISM Non-Manufacturing PMI can strengthen the US dollar

Bollinger Bands on the daily chart is directed down. The pair is trading between the lower and the middle MAs of the indicator. MACD histogram is in the negative zone. Stochastic is moving up in the middle of its range.
It is recommended to wait for clearer trading signals.
Support levels: 1.3000, 1.2904, 1.2855.
Resistance levels: 1.3121, 1.3278, 1.3343, 1.3583

Look at Doha on April 17

Crude had rallied (+44%) from its thirteen year low on a proposal by the Saudi’s, Russia, Venezuela and Qatar to cap oil output and reduce a global surplus.

The investors again are losing faith in crudes recent rally. Global fundamentals just do not support oil prices. Perhaps more importantly, doubts are growing over whether the major producers will be able to agree on an output freeze in Doha on April 17.

Both WTI and Brent retreated last week (-4%) for the first time since mid-February and remain on the back foot starting this week.

Iran  wants  to continue to produce until they can restore pre-sanction levels. While the Saudi’s Crown Prince Mohammed bin Salman said that his country would freeze their output only if “Iran and other major producers do as well.”

It seems that if an agreement could be reached to freeze output without Iran in Doha, it would not amount to anything.

Futures positions indicate that  traders are again adding to their ‘short’ positions and this after the liquidation of record ‘shorts’ position that were squeezed in the +44% rally over the past two-months.

Window for USD strength

Based on other wage indicators, the previous month’s reading of 2.2% looked low compared to the trend in other datasets (more like 2.5%). With that in mind, there is the potential for some more encouraging wage growth figures over the next few months, as pent-up demand in the labour market starts to translate into more rapid pay rises.

After a couple of mixed US labour reports, today’s data was fairly encouraging. Wage growth provided a pleasant surprise to markets, coming in at 0.3% MoM vs 0.2% expectations and taking the year-on-year change up to 2.3%. The rest of the report was fairly in line with expectations - Non-farm payrolls came in a touch above consensus at 215k, roughly around what we believe to be the current underlying trend (around 200k). The unemployment rate ticked back up to 5%, in line with our forecast, although not because of a correction in the household survey measure of employment.

OPEC to discuss the output oil freeze on 17 April

Everybody focuses on a global supply oil gut. Oil prices swung between gains and losses in North American trade on Thursday, as a broadly weaker U.S. dollar boosted the appeal of dollar-denominated commodities.

The prospect of less U.S. interest rate hikes this year according to United States Federal Reserve Chair Yellen   drove the dollar down against its major rivals..

Oil prices typically strengthen when the U.S. currency weakens as the dollar-priced commodity becomes cheaper for holders of other currencies.

Yesterday the U.S. Energy Information Administration said in its weekly report that crude oil inventories rose by 2.3 million barrels last week to an all-time high of 534.8 million barrels, underlining concerns over a domestic supply gut.

Saudi Arabia and fellow OPEC members Qatar and Venezuela agreed with non-OPEC member Russia to freeze output at January levels, provided other oil exporters joined in.

OPEC member Iran is expected to attend an oil producers meeting in Doha on April 17 to discuss an output freeze, although it may not necessarily partake in negotiations.