GBPUSD: Long for 1.2500

GBP/USD supported by Britain’s inflation data

Macroeconomic overview: Fed Chair Janet Yellen said the Federal Reserve's plans to raise U.S. interest rates gradually are aimed at sustaining full employment and near-2% inflation without letting the economy overheat.

Unemployment, at 4.5%, is now a little bit below the jobless rate that most Fed officials think signals full employment, and inflation is "reasonably close" to the Fed's 2% goal, she said. With the economy expected to continue to grow at a moderate pace, she said, the Fed is now shifting its focus. "Whereas before we had our foot pressed down on the gas pedal trying to give the economy all the oomph we possibly could, now allowing the economy to kind of coast and remain on an even keel - to give it some gas but not so much that we are pressing down hard on the accelerator - that’s a better stance of monetary policy," she said. "We want to be ahead of the curve and not behind it."

Yellen's comments largely echoed what she has said since then, and did not offer any new color on the timing of the rate hikes, or of the Fed's eventual reduction of its USD 4.5 trillion balance sheet.

British inflation held steady in March due to the later timing of this year's Easter holidays which pushed down airfares, and a dip in global oil prices, but the squeeze on households looks set to resume soon.

Consumer prices increased in March by 2.3% compared with a year earlier, the Office for National Statistics said on Tuesday, in line with market forecasts. Excluding oil prices and other volatile components such as food, core consumer price inflation slowed to 1.8%.

Inflation has accelerated in Britain in recent months, pushed up by a weakening of the pound since last year's decision by voters to leave the European Union, and by the rise in oil prices which has fuelled inflation in other countries too.

With wages growing at the same rate or slightly slower than prices in the shops, many households are facing the prospect of a renewed squeeze on their incomes after a respite when inflation dipped to zero in 2015 and remained low last year.

In the latest sign of how consumers are reacting to rising inflation and slowing wage growth, total sales inched up by just 0.1% in the January-March period compared with the same three months of last year, the British Retail Consortium said. That was the weakest growth since the three months to December 2008, the BRC said.

Bank of England Governor Mark Carney said on Friday he would keep a close eye on fading consumer demand as he and his fellow policymakers consider whether they should raise interest rates to protect the economy against inflation. Most Bank of England policymakers have signalled they see no urgency to raise interest rates, even as they predict inflation will peak at 2.8% in around a year's time. In our opinion inflation will exceed 3.0%.

Producer prices rose by 3.6%, a touch weaker than in February but above a forecast of 3.3%. Separately, the Office for National Statistics said house prices rose by an annual 5.8% in February, picking up speed from January. But house prices in London rose at their slowest pace in nearly five years, increasing by 3.7%.

The GBP/USD rose after UK inflation data release, but the reaction was short-lived.

Technical analysis: The GBP/USD remains below 14-day exponential moving average, which highlights the short-term bearish structure. The nearest target for currency bears is 1.2361 (50% fibo of March rise). This is a very important support and a close below this level could open the way to stronger drop. On the other hand, a close above 14-day ema may suggest a recovery.

Short-term signal: Long at 1.2430 for 1.2500.

Long-term outlook: Neutral

EUR/USD: We have opened a long position at 1.0615 after closing our short with a small loss.

EUR/CAD: Profit taken at 1.4145, earlier than initially assumed.

 

TRADING STRATEGIES SUMMARY:

FOREX - MAJOR PAIRS:

FOREX - MAJOR CROSSES:

PRECIOUS METALS:

 

How to read these tables?

1. Support/Resistance - Three closest important support/resistance levels

2. Position/Trading Idea:
   BUY/SELL - It means we are looking to open LONG/SHORT position at the Entry Price. If the order is filled we will set the suggested Target and Stop-loss level.
   LONG/SHORT - It means we have already taken this position at the Entry Price and expect the rate to go up/down to the Target level.

3. Stop-Loss/Profit Locked In - Sometimes we move the stop-loss level above (in case of LONG) or below (in case of SHORT) the Entry price. This means that we have locked in profit on this position.

4. Risk Factor - green "*" means high level of confidence (low level of uncertainty), grey "**" means medium level of confidence, red "***" means low level of confidence (high level of uncertainty)

5. Position Size (forex) - position size suggested for a USD 10,000 trading account in mini lots. You can calculate your position size as follows: (your account size in USD/USD 10,000) * (our position size). You should always round the result down. For example, if the result was 2.671, your position size should be 2 mini lots. This would be a great tool for your risk management!
   Position size (precious metals) - position size suggested for a USD 10,000 trading account in units. You can calculate your position size as follows: (your account size in USD/USD 10,000) * (our position size).

6. Profit/Loss on recently closed position (forex) - is the amount of pips we have earned/lost on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.
   Profit/Loss on recently closed position (precious metals) - is profit/loss we have earned/lost per unit on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.