Brexit remains the biggest driver for British Pound: USD/GBP (GBP=X)

Brexit remains the biggest driver for British Pound: USD/GBP (GBP=X)

Brexit remains the biggest driver for British Pound: USD/GBP (GBP=X)

Sterling falls to 31 month lows against the US Dollar

The pound to US dollar exchange rate continues to test the lower levels with interbank rates for GBP vs USD currently sitting at 1.2180 for the pair. It’s a case of both sterling weakness as a result of Brexit and dollar strength. With no deal preparations in full swing in the UK and under the leadership of the new Prime Minister Boris Johnson, the pound has reacted negatively to the increased likelihood that the UK may leave without a deal. There is also a growing chance that there could be a general election considering Boris Johnson has a majority of just 1 in the House of Commons.

Is a snap UK general election on the cards?

Reports have emerged of a possible snap general election in the UK and history tells us that there can be an additional degree of uncertainty in such times. With the Labour party appearing to talk shop with the Scottish Nationalist Party paving the way to form a coalition if Labour was prepared to offer a second referendum on Scottish independence then there could be a volatile period ahead for GBP to USD.

Brexit remains the biggest driver for Sterling rates

Brexit is the single biggest driver for sterling exchange rates at the moment and any new developments on whether a deal can be reached and whether the contentious backstop can be dropped will likely have a major impact on the price of sterling. JP Morgan believes sterling may fall to 1.15 against the dollar on a no deal Brexit in a conservative case and that it could just as easily fall a further 10%.

Global central banks continue to cut interest rates

The dollar meanwhile maintains its safe haven status after the US Federal Reserve cut interest rates by 0.25% at the July meeting. Although the Fed has cut interest rates reversing its tightening cycle in recent years the dollar has been further supported as other major central banks across the globe have also cut interest rates. The Reserve Bank of New Zealand surprised the markets this week with a sudden drop of 50 basis points which caught the markets off guard. It is relevant as it highlights how uncertain the global outlook is at present and how nervous central banks are. With moves like this it only highlights why the dollar is a safe haven currency and why the US dollar is so strong at present.

Technical Indicators

Overall, the bias in prices is: Downwards.

By the way, prices are vulnerable to a correction towards 1.25.

The projected upper bound is: 1.23.

The projected lower bound is: 1.20.

The projected closing price is: 1.21.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 22 white candles and 28 black candles for a net of 6 black candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 39.1300. This is not an overbought or oversold reading. The last signal was a buy 4 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 29.22. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 3 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -62. This is not a topping or bottoming area. The last signal was a buy 4 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 10 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed up 0.000 at 1.213. Volume was 100% below average (consolidating) and Bollinger Bands were 79% wider than normal.

Open     High      Low     Close     Volume___
1.212 1.213 1.212 1.213 49
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 1.22 1.25 1.28
Volatility: 8 8 10
Volume: 110,457 119,714 159,992

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX GBP= is currently 5.4% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of GBP= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on GBP= and have had this outlook for the last 23 periods. Our momentum oscillator is currently indicating that GBP= is currently in an oversold condition.

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