GBP: Bullish or Bearish - How Would You Play the Pound Sterling Today?

By Gary Howes

british pound sterling exchange rate complex today

The British pound exchange rate complex is proving a tricky prospect at present, but we bring you the latest views and opinions on how to approach the currency on Wednesday the 2nd of April.

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Thursday: ECB decision, UK services PMI

Thursday is a big day for sterling, follow our coverage here.

16:19: EUR steady ahead of tomorrow's ECB decision

ECB CoinsThe euro was steady on the eve of an important ECB meeting that could serve as a catalyst for coming weeks.

Joe Manimbo at Western Union says:

"For the central bank to serve as a positive catalyst, consensus views of no action would have to prove correct, but it wouldn’t come as a total surprise if the ECB should decide to lend more support to an economy struggling under the weight of dangerously low inflation and near record unemployment.

"Consequently, action in the form of a rate cut or other measures to help ward off the risk of deflation could see the euro weaken below the psychologically important level of 1.37 against the greenback. Market players will be on alert for potential wild card drivers if the ECB should stop short of action but come across more dovishly and sound new alarms over the threat to the economy from a high euro."

15:31: Thursday's Services PMI report will be critical

services sector and sterlingKathy Lien at BK Asset Management tells us why Thursday data release will be key for the near-term direction of sterling:

"For the time being, the pullback in sterling is limited because investors are waiting for the more important PMI services report. If all 3 PMIs (manufacturing, construction and services) decline in the month of March, a peak in the economy could turn into a peak for sterling.  

"However if service sector activity improves and it still could because consumer confidence increased, sterling will be able to hold onto its gains because investors refuse to lose hope that the Bank of England will be the next central bank to raise interest rates."

15:26: Solid gains for GBP-NZD

Among G10 currencies, the NZ dollar recorded the steepest decline versus USD today; the sell-off from 32-month highs is mainly due to the poor Global Dairy Trade milk auction results.

While the sell-off didn’t damage key technical levels overnight, NZDUSD extends weakness in Europe this morning.

By contrast, the softer construction PMI limited the London rally at 1.6664, yet the bias remains positive.

15:10: Bullish development witnessed on GBP-USD

Elliot Wave analysis is suggesting further upside in the Cable. A piece from EW-Forecast issued this afternoon says:

"GBPUSD found the support last week and recovered nicely above the upper trend line of a downward channel. A reversal from the low can be counted in five waves on the intraday charts, so we suspect that trend has changed and that pound will continue to the upside, especially after a corrective retracement back to 1.6550/70 that could unfold in the next few sessions."

EW forecast for GBP USD

15:03: Outlook positive for EUR-GBP

The EUR is still preferred over the GBP at this stage say analysts at ICN Financial:

"The outlook is positive for EURGBP above 0.8285 and the intraday risk-limit is below 0.8160.

"The pair settled yesterday above 0.8285 to find the positive support to extend gains, waiting for the breach of the MA 50 & 100 targeting 0.8410 areas. A breach of this level will extend gains toward 0.8500 then 0.8565. Stochastic is positive supporting the upside move that requires stability above 0.8260."

14:30: UK pound firm, is the uptrend reasserting itself?

The UK pound has found Tuesday to be decent with gains being seen across the board. This comes despite the miss on today's Construction PMI. This could be a sign of renewed interest in sterling; could the broader uptrend resume after having stalled?

11:03: Latest euro pound exchange rate predictions (EUR-GBP)

pound and euroUBS say they are neutral on the euro pound exchange rate:

"The recent sharp sell-off brings our focus on the support at 0.8250, which was tested on Friday. A close below this will be negative as it would see the MACD cross below its zero line. Resistance is at 0.8323/42."

Analyst Luc Luyet at Swissquote predicts further strength in the euro thanks to an improved technical picture:

"EUR/GBP has improved, breaking the resistance at 0.8298. However, a break of the key resistance at 0.8322 is needed to suggest something more than a temporary bounce. Supports stand at 0.8246 and 0.8191 (28/02/2014 low).
 
"In the longer term, the failure to make any follow-through after the break of the resistance at 0.8350 (06/02/2014 high) calls for caution as prices remain below a declining 200 day moving average. A key support area stands at between 0.8168 and 0.8158.

More predictions here.

09:38: Short-term momentum is positive

Swissquote Research give us an opinion on how to play the pound dollar exchange rate today:

"GBP/USD is digesting its recent rise. However, the short-term momentum remains positive as long as the hourly support at 1.6598 (28/03/2014 low) holds. Hourly resistances can be found at 1.6684 and 1.6718. Another hourly support stands at 1.6555 (27/03/2014 low).
 
"In the longer term, prices continue to move in a rising channel. As a result, a bullish bias remains favoured as long as the support at 1.6460 holds. Another key support stands at 1.6220 (17/12/2013 low)."

pound dollar exchange rate

09:35: GBP firm

The UK currency has not taken much heat from today's miss on construction data.

As we mentioned earlier that would be because of the relatively small part construction plays in the UK economy.

09:31: Construction in rude health (BUT - that is not good enough for GBP)

UK construction PMI came in at 62.5, markets had expected 63.0.

This is still an incredibly strong number, but as always in FX, it is how the result compares to expectations that matters.

08:36: Bearish or bullish - what is sterling doing?

sean lee traderSean Lee trades currencies for a living, on his FXWW site he today says:

"Obviously some of the crosses like GBP/JPY are looking bullish and others like GBP/NZD are starting to show some bullish potential but weighed against this are the bearish tendencies for the GBP against the EUR, AUD and CAD.

"I wouldn’t expect too much from today’s European session but I’m looking to trade a 1.6575/1.6650 range with a bearish bias."

08:34: GBP-EUR could sink to 1.20

The sterling to euro rate had a tough day yesterday; will it sink yet lower on Wednesday?

"Today’s construction PMI is of limited significance, so GBP is more likely to be driven by events elsewhere. There will be some interest in the comments from BoE deputy governor Cunliffe, but we don’t expect anything too market-moving. There may still be scope for GBP/USD to slip to 1.6600 on decent US numbers, and EUR/GBP may now revisit 0.8333 (1.20 GBP/EUR) having failed to breach support at 0.8250." - Lloyds Bank Research.

What matters for the UK pound exchange rate today?

It's all about the release of the Construction PMI release at 09:30. While the construction sector is not the largest component in the UK economic makeup it is still closely watched by forex traders.

Traders will be looking for today's figure to beat expectations if they are to drive the value of the British pound higher.

Yesterday we had a disappointment from the Manufacturing sector; this saw the pound come under pressure. Expect similar pressures should today's data disappoint.