Today, on May 22nd, the British Pound is consolidating against the US Dollar. The British currency has almost recovered from the recent downswing. At this point, the currency pair is trading in a narrow price range close to 1,6888. Yesterday's drop in GBPUSD and other currency pairs was triggered by the FOMC meeting minutes, which indicated further tapering and economic recovery, thereby backing the US Dollar.
Today's major news block for the British Pound is reduced to the UK GDP report as well as the approved mortgage claims in April, Market Leader reports.
The minutes failed to reveal any unexpected information. Therefore, there was no sharp volatility hikes among dollar pairs, Market Leader reports. The minutes were published yesterday, around the end of yesterday's American trading session. The report confirms that the FOMC members spent a lot of time discussing interest rates. In particular, they were focused on future interest rate hikes. The economic forecasts for the US economy turned out to be favorable, which led the participants to believe that it is necessary to continue the tapering of QE3 at the same pace.
At the same time, they also discussed asset management strategies. At this point, the Fed's asset portfolio is estimated at $4300 billion, not to mention the reserves poured into the US banking system (equal to $2600 billion). Still, market participants are still anticipating a earlier-than-expected interest rate hike.
The American session showed no considerable volatility. The US stock market recovered a bit after 2 consecutive bearish sessions. The minutes didn't influence the market a lot since there was no key change in the Fed's policies.
Despite the fact that the negative correlation between US stock indices and the US dollar is broken, the meeting minutes didn't influence the indices but managed to drop the American currency against other majors a little bit. Gold and other safe-haven assets also start losing value since the Fed's meeting minutes contained the confirmation that the US economy keeps on recovering, which reduced the need for safe-haven assets.
At the same time, the debt market is showing an increase in the 10-year US bond yield – from 2,53% up to 2,56%, which later made the US Dollar regain some of the lost ground against the common European currency.
GBPUSD Prospects
According to the comprehensive analysis of GBPUSD H1 performed by Masterforex-V Academy, the British currency keeps on recovering within the scope of a an upward MF sloping channel (marked blue), which is happening against the previous mid-term downtrend. The upward and downward MF sloping channels are built through local highs and lows set yesterday. They form a triangle, which testify to the balance of powers between the bears and the bulls. In other words, the bias is unclear and the situation is still ambiguous in advance of the UK GDP report.
If GBP goes on strengthening against USD backed by the fundamental data , we are likely to see the price breaking above the top of the downward sloping channel (marked red). In this case, the price may rally up to 1,6919 and even 1,6945. The scenario is represented by the blue arrow.
Alternatively, a break below the bottom of the upward MF sloping channel is likely to signal a further decline of GBPUSD. If this is the case, 1,6855 is the target to watch. On top of that, such a break may question the mid-term recovery of the British Pound. The scenario is represented by the red arrow.
According to the trading experts from the Binary Option Department of Masterforex-V Academy, GPBUSD options are now suitable for buying after retracements.
