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  • Dollar gets whacked by Trump’s CNBC interview calling for the Fed to stop rasing rates.
  • GBP/USD spikes back to key 1.3040 level.
  • The pound has been soft on the back of another rund of disappointing data from the UK and Brexit concerns.

GBP/USD has been given a life line having just popped back through 1.30 the figure and on to 1.3049, breaking through the hourly 21-SMA at 1.3032 following Trump’s comments in a CNBC interview where he said that he does not approve, even though he said he “put a very good man in” at the Fed in Powell.

Markets are tumbling to Trump’s comments, with stocks, the dollar and Treasury yields all falling. The DXY is at 95.21 from 95.47 having been climbing in a range of 94.9880-95.6520. US 10 year yields are now down at 2.84% -0.03% within the day’s range of 2.83-2.90% and stocks are heading towards the day’s lows although not in a straight line as raders digest the headlines, figuring that a pause in interest rates hikes would be a psoitive – not that Trump has teh austhority to order the Fed or swey the FOMC from voting against hiking rates.  

Markets to turn back to their sences, or at least go back to school and be reminded that  FOMC members are insulated from partisan politics

Markets will soon come to their sense and remeber that the Fed’s Chair and the FOMC are insulated from partisan politics. It is true that Trump and the Congressional leaders are free to complain all they like. Congress can call hearings and use subpoenas to compel Powell to listen to their complaints, but the FOMC members vote and that’s that.   So, this could well be a gift form Trumo to cable bears – 1.3080 would otherwise call that trade off.  

Meanwhile, the pound has been soft on the back of another rund of disappointing data from the UK, (retail sales (ex-fuel) fell 0.6% in the Jun month, against expectations of a 0.1% increase), and indeed, Brexit concerns will surely keep the pound’s downside underpinned and analysts at Rabobank’s central view is that GBP/USD will be trading around the 1.29 area on a 12 mth view:

“On a hard Brexit, we see risk of a move to 1.1200. However, for the mean time, analysts at Scotiabank explained that ‘the BoE expectations for August are little changed’ this morning (83% priced for +25bps on Aug 2) and that ‘focus will fall on BoE DG Broadbent’s speech Monday to gauge the depth of policy-makers’ conviction for tighter policy.’

GBP/USD levels

The 1.3040 level is key in this channel  as being the the Nov 3 low and previous support that gave way to a break of 1.30 the figure. On a meangful and cmplete turn around in sentiment however, to the upside, the 50-D SMA is located at 1.3309 and the weekly cloud top level is key. 1.3461/80  comes before the convergence of the 200-D SMA and 1.3597/1.3600. The 1.3708 level at the 50% Fib of 1.3040-1.4377 remains compelling on the wide. However, this 1.3040 level could be the topps this bounce. In a correction back to the downside, eyes will turn to the 1.29 level.  

“We note that the daily RSI has not confirmed the new low and directly below here lies Fibonacci support at 1.2918 (50% retracement of the move up from 2016) and it is possible that we will see some profit taking here. Below 1.2918 would be treated as the break down point to 1.2580, the 61.8% retracement from 2016,”  

– analysts at Commerzbank explained.