Sterling Sojourn and a Yen Crossroad

February 26, 2016

Sterling Sojourn:

“GBP Second Estimate GDP q/q (0.5% v 0.5% expected)”

Pound Sterling received some respite from the relentless Brexit related selling as domestic fundamentals at least showed some sort of positive after GDP printed as expected at 0.5%.

Business spending did fall and flags have been raised about the balance of the economy. Questions remain around whether the headline number actually hides the part time, low wage nature of the growth experienced and how sustainable the growth can be long term.

But for now GBP has earned respite from the Brexit risk uncertainty, backed up by the technical barrier on the chart below.

GBP/USD Daily:
Forex chart, GBPUSD Daily 160226
Click on chart to see a larger view.

There were a few ways to draw the bearish channel but either way the drop is pausing on support for now.

Keep an eye on the Technical Analysis section of the Vantage FX Forex News Centre later today for a closer look at GBP/USD and some possible trading scenarios surrounding the Brexit referendum on June 23.

Yen Crossroad:

“USD Core Durable Goods Orders m/m (1.8% v 0.2% expected)”

“USD Unemployment Claims (272K v 271K)”

Moving into the US session, we saw core durable goods orders rise considerably. A rare piece of good news for the manufacturing sector!

This contributed to USD/JPY strength, bouncing out of the technical zone that we have been speaking about on the @VantageFX Twitter stream.

USD/JPY Daily:
Forex chart, USDJPY Daily 160226
Click on chart to see a larger view.

Match today’s USD/JPY and S&P500 charts with the two in yesterday’s Headlines and Correlations blog for a highlighted view of what we are watching here.

Price really is at a crossroads here, coming back to possibly retest previous support as resistance. I’m still treating the weekly trend line level as a larger support zone though, and am not interested in trading any sort of clean retest to the short side here.

———-

Chart of the Day:
With the current market themes around Oil, stocks and the Japanese Yen, we can sometimes get bogged down looking at the same charts. The idea of the chart of the day section was to keep the blog fresh and highlight some new trading opportunities.

The currency cross of EUR/AUD is one pair that we don’t get a chance to feature all that often, with the last time the pair made our chart of the day being way back on Melbourne Cup Day in November 2015!

EUR/AUD Daily:
Forex chart, EURAUD Daily 160226
Click on chart to see a larger view.

These major levels are a perfect example of why you keep them on your chart even if they have been broken. The type of break-out is very important too and as you can see, each time price has broken the marked level, it has gone through it HARD.

With price back on the level again, whichever way you choose to trade from, you still have a clearly defined level to manage your risk around.

———

On the Calendar Friday:
NZD Trade Balance
JPY Tokyo Core CPI y/y
GBP BOE Gov Carney Speaks

USD Prelim GDP q/q

Do you see opportunity trading Forex crosses? Take advantage on your own instant $50,000 Forex demo account.

Dane Williams – @VantageFX

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