Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Pound Sterling Extends Gains

By InstaForex GroupForexJan 13, 2022 04:40AM ET
www.investing.com/analysis/pound-sterling-extends-gains-200614608
Pound Sterling Extends Gains
By InstaForex Group   |  Jan 13, 2022 04:40AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

After Fed Chairman Jerome Powell made it clear that there would be no four interest rate hikes, market participants shifted their focus from their number to the timing of rate increases.

Against this background, rumors began popping up that the US Federal Reserve would not stick to the previously announced plan, and the first rate hike would come in January instead of April.

Naturally, due to surging inflation. However, the latest data showed that inflation rose by 7%, while all assumptions regarding the timing of rate hikes were based on a 7.1% increase. The difference is not significant but still distinct.

It turns out that inflation is growing slower than the Fed expects. Therefore, the regulator has no reason to rush to take appropriate measures. If interest rates remain unchanged shortly, the US dollar will hardly gain value.

US inflation.
US inflation.

Thus, one can conclude that the market is currently being driven by factors directly related to the United States, including statements or macroeconomic reports. Statistics from other countries are irrelevant to the market.

Today, traders may take notice of data on jobless claims. The number of Americans filing new claims for unemployment benefits is anticipated to increase by 8,000, while the number of continuing claims is forecast to rise by 6,000.

Although this growth seems insignificant, the very fact of an increase in the number of jobless claims is important. Market players may see it as a negative factor, significantly reducing the attractiveness of the US currency.

Against this background, the pound sterling has every chance of extending gains, although the time is ripe for a rebound and a local correction.

US continuing claims.
US continuing claims.

Data on producer prices to be released today will hardly have a severe impact on the market, even though the index is expected to rise to 9.8% from 9.6%. This no longer matters after yesterday’s inflation report, although it indicates their further upside potential.

However, the producer price index is unlikely to affect the timing and pace of a rate hike since the Fed already assumes that inflation rates could slow down by the end of this year.

US PPI.
US PPI.

The GBP/USD pair gained value and broke through the resistance level of 1.3600. This led to an increase in the volume of long positions, despite the pound sterling’s overbought status. The RSI is above the 70 line on the four-hour chart, indicating bullish market sentiment.

According to the daily chart, the price is paring losses incurred in June-December last year. At the moment, the pound has recovered by 50%, which casts doubt on a downward scenario.

Outlook

Although the pound sterling is overbought, its inertial move is still relevant in the market. If the price consolidates above the 50% Fibonacci level (1.3710), it will most likely head towards the area of 1.3800-1.3835.

An alternative scenario suggests a temporary stagnation around the level of 1.3700, followed by a technical pullback. Comprehensive indicator analysis signals that it is possible to buy the pair on the short-term, intraday, and medium-term charts.

GBP/USD 4-hour chart.
GBP/USD 4-hour chart.

InstaForex Group

Pound Sterling Extends Gains
 

Related Articles

InstaForex Group
UK Inflation Report Cools Down Pound Sterling By InstaForex Group - May 19, 2022

Two months ago, the Bank of England predicted that inflation would reach its peak in April. Yesterday’s report proved the forecast and unveiled a jump to the 40-year high of 9.0%...

Kenny Fisher
Australian Dollar Dips After WPI By Kenny Fisher - May 19, 2022

After three successive winning sessions, the Australian dollar reversed directions on Wednesday. In the European session, AUD/USD was trading slightly above the symbolic 70...

Craig Erlam
GBP/USD: Can It Break Major Support? By Craig Erlam - May 19, 2022

Possible divergences appearingThe pound has come under heavy pressure recently, particularly against the dollar which has been performing well against the broader market. While the...

Pound Sterling Extends Gains

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email