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Aug 3, 2018

BRITISH POUND TUMBLES DESPITE BANK OF ENGLAND RATE HIKE

DOVISH RATE HIKE

The British pound tumbled towards the 1.3000 level against the US dollar this week, despite the Bank of England raising interest rates 0.25 percent as widely expected. The MPC voted unanimously to hike interest rates 9-0, bringing the United Kingdom’s rate of interest to 0.75 percent. The Bank of England delivered dovish forward guidance to market participants, noting that any future rate hikes from the central bank would be gradual and limited. Bank of England Governor Mark Carney reiterated during his press conference that the United Kingdom may face adverse effects from a hard-Brexit deal with the European Union.

  • The GBPUSD pair is bearish while trading below the 1.3100 level, further losses towards the 1.2950 and 1.2880 levels seem possible.

  • If the GBPUSD pair trades above the 1.3100 level, further upside towards the 1.3150 and 1.3240 resistance levels remains possible.

FED REMAIN UPBEAT

The Federal Reserve kept US interest rates on hold this week, with the FOMC delivering an upbeat assessment of the United States economy. The FOMC policy statement noted strong jobs growth and gradually rising inflation forecasts as reason enough for the United States central bank to continue to hike interest rates. The US dollar edged higher in the aftermath of the Federal Reserve’s decision this week, with the greenback gaining broadly against antipodean currencies and the single currency.

  • The USDCAD pair is bearish while trading below the 1.3000 level, further downside towards 1.2900 and 1.2810 levels seems possible.

  • If the USDCAD pair moves above the 1.3070 level, further upside towards the 1.3123 and 1.3220 resistance levels remains possible.

BOJ UNDERWHELM

The U.S. Dollar advanced towards the 112.00 level against the Japanese yen this week, after the Bank of Japan disappointed investors with only minor adjustments to its monetary policy. The Bank of Japan made changes to ETF purchases and targeting its yield-curve, with the Japanese central maintaining a strong commitment to reaching long-term inflation goals. The Japanese yen currency later moved-away from 112.00 level as Sino-US trade tensions worsened, with the current US administration planning even-larger trade tariffs on some Chinese imports.

  • The USDJPY pair is bearish while trading below the 111.39 level, further downside towards the 110.70 and 110.00 levels seems possible.

  • If the USDJPY pair moves above the 111.39 level, buyers will likely towards the 112.00 and 112.80 resistance levels.

CRYPTOS WEAKEN

Cryptocurrencies began to erase recent gains this week, as the digital currency market suffered a bad start to the month of August. Bitcoin fell below the $8,000 level, as the cryptocurrency exchange briefly HitBTC went off-line this week, causing crypto investors to panic. Ethereum and Litecoin remained weak for most of the week, with the second and seventh largest cryptocurrencies by market capitalization sliding back towards trading levels not seen since April this year.

  • The ETHUSD pair is strongly bearish while trading below the $395 level, further losses towards the $350 and $290 levels seem possible.

  • If the ETHUSD pair moves back above the $460 level, further upside towards the $480 and $505 resistance levels seem possible.

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