GBP/USD Forecast: Strong uptrend but, its end is not far away

GBPUSD 13th May, 2015

GBP/USD (currently at: 1.5745) continued uptrend run to break 1.5699 and it fell after touching 1.5766. This is what I expected in this post.

The BOE is still watching the economic data of UK with no serious action. However, the recent data was strong enough to push everyone to buy sterling pound, this is what I call the election sales. On the other hand, the dollar is still suffering from uncertainty and mixed expectations about the timing of the first rate hike. In addition, moderate to weak economic data releases had effect too on the US dollar. Sterling pound is strong enough to stay for a while within this range and the way to 1.5805 (the next major resistance) should be very easy.

My technical overview adds another space for the current uptrend rally again and I can see that there is higher chances that this uptrend will last for a while till we break 1.5805 first and then, we will see whether this trend will continue or not. This move will be struggling battles between bears and bulls during the next few days or weeks and the sideline moves will be noticed once we move above 1.5805. Buy GBP/USD and watch this resistance level: 1.5805 as a checkpoint for this rally. Our close support levels are: 1.5000 and 1.5565

The GBP/USD has the following major resistance and support levels:

  • RESISTANCE: 1.6000
  • SUPPORT: 1.4334

Breaking these levels in any direction will take us higher or lower.

My Daily BUY/SELL advice (30 pips stop-loss applied):

  • Sell: at 1.5805 – Take profit 1.5705 (100 pips profits)
  • Sell: at 1.5990 – Take profit 1.5890 (100 pips profits)
  • Buy: at 1.5650 – Take profit 1.5750 (100 pips profits)
  • Buy: at 1.5550 – Take profit 1.5750 (200 pips profits)
  • Buy: at 1.5565 – Take profit 1.5665 (100 pips profits)

This review is valid during trading week: 13th to 15th of May, 2015

GBP/USD Forecast: Strong uptrend will last or .. ?

GBPUSD 29th April, 2015

GBP/USD Analysis

GBP/USD (currently at: 1.5420) broke the strong resistance 1.5429 easily and had a rally during the last week as I’ve previously mentioned in my previous post.

The BOE is still watching the economic data of UK with no serious action. On the other hand, the dollar is suffering from uncertainty and mixed expectations about the timing of the first rate hike. Sterling pound will stay for a while within this range and the way to 1.5805 (the next major resistance) should not be that easy.

My technical overview adds extra space for the current uptrend rally and I can see that there is higher chances that this uptrend will last for a while till we touch 1.5805. The move will be slower a little bit than what happened the last 48 hours. I recommend buying this pair with caution this time because mixed moves might occur sharply. Buy GBP/USD and watch these resistance levels: 1.5699 and 1.5805 as checkpoints for this rally. Our close support levels are: 1.5000 and 1.4565

The GBP/USD has the following major resistance and support levels:

  • RESISTANCE: 1.5805
  • SUPPORT: 1.4334

Breaking these levels in any direction will take us higher or lower.

My Daily BUY/SELL advice (30 pips stop-loss applied):

  • Sell: at 1.5680 – Take profit 1.5600 (80 pips profits)
  • Sell: at 1.5790 – Take profit 1.5690 (100 pips profits)
  • Buy: at 1.5350 – Take profit 1.5500 (150 pips profits)
  • Buy: at 1.5250 – Take profit 1.5350 (100 pips profits)
  • Buy: at 1.5010 – Take profit 1.5090 (80 pips profits)

This review is valid during trading week: 29th-30th April – 1st of May, 2015

Interest rate effect

How interest rates affect: Individuals, Businesses & the Stock Market?

Interest Rate Effect

Once Janet Yellen ended the QE program of the US dollar, Interest rate hike as a topic started to be the most popular topic on the investors tables. Interest rate effect is a dilemma for everyone because it affects every single part in the economy directly so, reactions are interchangeable, mixed and must be well-understood to know where is every local currency is moving. Basically, Interest rate is the cost someone pays for the use of someone else’s money

Away from complicated details, I will simplify the effect of this important term through the following explanation

Inflation Definition and Impact

Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money.

Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum.

Interest rate adjustment is one of the powerful tools which is used to control the inflation/deflation by the central banks

Interest Rate Effect on Individuals

Individuals are divided into two major types:

  • – Money Owner (individual who has extra money amount to invest or to save)
    • Increase in interest rate for this type of individuals mean the followings:
      • – Saving money (especially in banks) becomes much favorable for the majority of investors. Banks saving accounts, treasury bills and bonds offer competitive returns with lower risk if compared to stock market returns. Everyone knows that stock market is a high risk market.
      • – Lower spending desire because, money-saving is much tempting
  • – Money Needy (individual who has no/low money fund to get his/her needs and demands)
    • Increase in interest rate for this type of individuals mean the followings:
      • – Banks loans, credit cards, credit allowances and mortgage are much expensive
      • – Lower spending desire because, cost of borrowing is higher and less income available

Interest Rate Effect on Businesses

Businesses have different types too however, the effect of interest rate can be explained as follows:

  • – Businesses have 3 majors areas that are directly affected with interest rate increment
    • – Lower demand on their services and products driven by lower spending behavior from individuals
    • – Lower demand on the business services and products means lower profits for the business and lower returns on their stocks too. Then, stock price falls affected by the lower returns.
    • – Higher interest rate means higher borrowing costs for the businesses. Usually businesses borrow to expand and develop their sizes and operations. Higher interest rate will eliminate the business from expansion and growth.

Interest Rate Effect on the Stock Market

Stock market is directly affected with interest rate as follows:

  • – Stock market is the interaction area between the investors and the businesses. Higher interest rate will affect the businesses as I’ve mentioned above and this will push the stock prices lower. When stock prices are lower, this means that the whole market declines and its index(es) fall. Investors want appreciation for their equities overtime and falling stock prices and indexes will threaten their equities appreciation and lower their desires to invest in the stock market.

Question: Higher interest rate is a stock market killer?

The answer is: BIG FAT NO!

However, Interest rate is a correction flag for any stock market and it clearly means that a major correction might be coming in the near future, keep your eyes opened!.

What is important to know is that: Quantitative easing and low interest rate encourage investing in stock market and usually, the stock market indexes make new highs during the low interest rate periods and QE programs implemented by the governments. But, This does not mean that with a higher interest rate, you must sell your stocks.

There are other important factors affect the stock market so, do not panic. Corrections and consolidations usually happen every year.

What’s important is to watch the economic data releases to see how the economy of a specific country performs and based on this, you can sell and buy stocks.

Remember to keep sharing the useful knowledge

GBP/USD Forecast: Mixed trends

GBP/USD 22nd, April 2015

GBP/USD Analysis

GBP/USD (currently at: 1.5025) seems to be attractive for the buyers. I am changing my technical look to this pair for a while.

The BOE is not behind this move, the US dollar is weaker against sterling pound and it is clear that this weakness is the main reason behind what is happening. BOE is watching the inflation of England and we’ve to wait till things become much obvious.

My technical overview has a limited change and I can see that there is limited uptrend and this is a reason to buy GBP/USD with caution. I recommend buying this pair around this level (1.5000-1.5030) only and it is recommended to use small stop-loss because it might fall hard again in any time. We can buy GBP/USD and watch these resistance levels: 1.5185 and 1.5429

The GBP/USD has the following major resistance and support levels:

  • RESISTANCE: 1.5429
  • SUPPORT: 1.4334

Breaking these levels in any direction will take us higher or lower.

My Daily BUY/SELL advice (30 pips stop-loss applied):

  • Sell: at 1.5395 – Take profit 1.5295 (100 pips profits)
  • Buy: at 1.5050 – Take profit 1.5120 (70 pips profits)
  • Buy: at 1.5020 – Take profit 1.5070 (50 pips profits)
  • Buy: at 1.5000 – Take profit 1.5100 (100 pips profits)

This review is valid during trading week: 22nd-24th April, 2015

What is Inflation?

Videos: Get to know Inflation

Inflation is one of the most important and critical economics terms that everyone must watch closely, its importance comes from its effect on the international economy and how central banks highlight and consider it in all its monetary actions. We are here to help you with these easy videos posted by Bank of England (UK) – YouTube Channel (Full credits reserved to BOE with thanks for sharing such useful videos)

Inflation Definition

Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money.

Let’s go through the following videos to know more about inflation ..

Video #1: What is Inflation?

Video #2: Why does inflation matter?

Video #3: How does the Bank manage inflation?

Video #4: History of inflation

Remember to keep sharing the useful knowledge