GBPUSD Eyeing a Test of 1.4850

GBPUSD Eyeing a Test of 1.4850

By: Darryl Frankfort | Where To Trade | On:20-04-2015 11:41
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Key Highlights

  • British pound tumbled against the US dollar and looks set for a test of 1.4850 in the near term.

  • Chicago Fed National Activity Index (CFNAI) released by the Federal Reserve Bank of Chicago registered yet another decline and posted a reading of -0.42 in March 2015.

  • USDCAD was seen struggling to clear the 1.2250 resistance area, which represents a major hurdle.

Key Releases:

Chicago Fed National Activity Index (US dollar)

Chicago Fed National Activity Index

Earlier during the NY session, the Chicago Fed National Activity Index (CFNAI), which is a monthly index designed to gauge overall economic activity and related inflationary pressure was released by the Federal Reserve Bank of Chicago. The last reading before the release was -0.11, but it was revised down to -0.18. Moreover, the current index was also down to -0.42 in March 2015. In short, there was a sharp decline in the index, which ignited a selling pressure on the US dollar.

The report mentioned that the decline in CFNAI was mainly driven by a fall in production-related indicators. The main thing to note was that “two of the four broad categories of indicators that make up the index decreased from February, and three of the four categories made negative contributions to the index in March”.

Currently, the three-month moving average stands at -0.27, which is a lot lower compared to the last -0.12 in February 2015. The CFNAI Diffusion Index declined from the last reading of -0.02 to -0.09 in March 2015. Indicators that made negative contributions were 38, and 47 made positive contributions. The worst were the Employment-related indicators, which contributed –0.03 this past month compared to the last increase of 0.11.

Market Reaction

The US dollar fell initially after the release against most major currencies, but later managed to hold the ground. The GBPUSD was one of the worst performers, which recently broke several supports and looks set for more losses in the short term. The next level of interest could be around 1.4850 where the British pound buyers might try to protect more downsides.

Any further losses might easily take GBPUSD towards the 1.4820 level. On the upside, the 1.4920 resistance area is now a major pivot where buyers might struggle if the pair corrects from the current levels.

There were a few earnings report lined up today like for Morgan Stanley. The outcome was above expectation and caused an upside reaction in stocks. Futures for the Dow Jones Industrial Average traded higher towards 18,060 and the S&P 500 index moved up by around 20 points to 2,100.

 

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