The pound is trading sideways within a narrow range this week, short-term selling pressure still exists
The pound traded sideways against the US dollar, staying above the 1.39 level. On Wednesday, the British Chancellor of the Exchequer Sunak delivered an annual budget speech, announcing the extension of the emergency aid plan and tax increases for companies. Sunak said that with the help of Europe's fastest vaccination plan, the economy will return to its pre-pandemic scale in mid-2022, six months earlier than previously predicted. But he said that in the next five years, the size of the British economy will still be 3% less than that without the impact of the new crown crisis. Since the UK is still under the new crown epidemic restrictions, additional support is currently needed. The pound has risen significantly against the dollar since the beginning of the year as investors bet that the speed of the British vaccination program will make the economy reopen sooner.
GBP/USD trend, the technical chart shows that the RSI and Stochastic Index have been in the overbought area last month, and showed signs of falling at the end of last week. At the same time, the MACD indicator has just broken the signal line, and the exchange rate has also fallen below the MA-10. All are technical signals for British pound to adjust. The current recent support first look at MA-50 of 1.3740. This area is also an upward trend line extending from November last year. If the pound falls in this area in the future, it is expected to have a good chance of ushering in a new round of decline. Calculated based on the cumulative increase since September last year, the adjustment range of 38.2% is 1.3640, and the range of 50% and 61.8% will be seen at 1.3455 and 1.3265 respectively. On the other hand, if exchange rate rise, need to pay attention to the two tops at 1.4344 and 1.4376 that formed in January and April 2018.There was a sharp decline in pound to the low of 1.2660 in August of the same year. Therefore, the current upward trend Resistance is also an important reference in these two areas; and the current nearer resistance can refer to the 10-day average line of 1.4010 restricted this week to last week's high of 1.4235.
The euro against the British pound is trending. Since the exchange rate fell below the 0.90 mark in mid-January, it has seen a continued downward trend. Although there was a counterattack last Monday, the upward is subject to the MA-25, which is currently at 0.8710, this will continue to be a reference for resistance. As the chart shows that the RSI and the Stochastic Index are still falling, it is expected that the euro will continue to test pressure against the pound. In terms of larger upward resistance, in November last year, the euro against the pound fell below 0.8856 and 0.8863 respectively, which will be regarded as a more critical basis for resistance; further resistance is expected to be at 0.8920 and 0.90 mark. The downside key points to the 0.85 mark. For the time being, we can see that it stayed above this area last Wednesday, and further support will be seen at 0.8278, the low of last February.
Highlights of the week:
UK Markit's February service industry PMI was 49.5
UK Markit's February comprehensive PMI final value is 49.6
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