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GBP/USD Rate Reversal May Accelerate as NZD/USD Price Rises

GBP/USD Rate Reversal May Accelerate as NZD/USD Price Rises

2019-12-20 00:00:00
Daniel Dubrovsky, Analyst
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British Pound Slides as New Zealand Dollar Gains

The British Pound was the worst-performing major currency on Thursday, extending declines in the aftermath of last week’s UK general election. Losses accelerated once yesterday’s Bank of England rate decision crossed the wires, allowing the fundamental risk of no-deal Brexit to reinstate itself for GBP. The central bank left rates unchanged, though downgrading 4Q GDP estimates as CPI is expected to slow ahead.

On the flip side of the table, the sentiment-linked Australian Dollar and New Zealand Dollar had a fairly rosy session. The former was propped up by better-than-expected local employment data in addition to the “risk-on” tone from US stock exchanges. The S&P 500 and Dow Jones ended the day 0.45 percent and 0.49% to the upside respectively.

Investors have had near-term reason to chase returns in equities following the “phase one” US-China trade agreement. This has also fueled gains in sentiment-linked crude oil prices on what could be an improving outlook for global growth. The haven-linked US Dollar aimed cautiously lower as traders’ need for preserving capital and prioritizing liquidity was diminished.

Friday’s Asia Pacific Trading Session

Asia Pacific benchmark stock indexes may follow Wall Street higher as the week wraps up, pressuring the anti-risk Japanese Yen. This may bode well for the sentiment-linked AUD and NZD. The New Zealand Dollar may rise on local credit card spending for November. Data out of the country has been tending to increasingly outperform relative to expectations as of late, opening the door to continuation ahead.

British Pound Technical Analysis

The British Pound may be reversing its dominant uptrend from September after GBP/USD confirmed an Evening Star. This is a bearish candlestick pattern. Prices have also taken out near-term rising support from October. That may push the currency pair towards November lows with 1.2950 standing in the way as immediate support. Simultaneously, an uptick in net long positioning may add fuel to GBP’s descent.

GBP/USD BULLISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -11% 10% -4%
Weekly -10% -10% -10%
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Chart of the Day – GBP/USD

GBP/USD Rate Reversal May Accelerate as NZD/USD Price Rises

Chart Created Using TradingView

--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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