British Pound: USD/GBP (GBP=X) break below 1.25 drives broader Sterling weakness

British Pound: USD/GBP (GBP=X) break below 1.25 drives broader Sterling weakness

British Pound: USD/GBP (GBP=X) break below 1.25 drives broader Sterling weakness

The British Pound has come under more concerted selling pressure over the past 24 hours with a fall below $1.25 against the U.S. Dollar looking to be a catalyst to the broader sell off in the wider Sterling exchange rate complex.

The $1.25 level is a significant support level for GBP/USD and its breaking therefore poses further potential downside. This would likely spell weakness in a number of other GBP-based currencies we believe.

“Sterling continued fighting an uphill battle as persistent political uncertainty, signs of a sharp cooling of the UK economy and technical factors all conspired against the UK currency,” says Mathias Van der Jeugt, an analyst with KBC Markets in Brussels.

Sentiment towards the UK currency remains poor amidst a significant time of change in UK politics with a new Prime Minister due to be installed by the end of July and little sign of a way out of the current Brexit impasse. 

With political uncertainty comes the inevitable currency weakness.

“Brexiteer Boris Johnson has the best cards to succeed Theresa May as Prime Minster. With parliament opposing a hard Brexit, clashes in parliament will increase political uncertainty and weigh down GBP sentiment in the short-term,” says David A. Meier, an analyst with Julius Baer in Zurich.

Meanwhile, the UK economy appears to have slowed down sharply through the mid-year period, leading to growing expectations for a potential interest rate cut at the Bank of England in coming months.

“Political uncertainties, sluggish economic growth and a potentially looser monetary policy are the main ingredients of this poisonous cocktail. Mr. Sterling has certainly imagined his summer holiday differently,” says Marc-André Fongern, Head of FX Research at MAF Global Forex.

Overall, the bias in prices is: Downwards.

By the way, prices are vulnerable to a correction towards 1.27.

The projected upper bound is: 1.26.

The projected lower bound is: 1.24.

The projected closing price is: 1.25.

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 19 white candles and 31 black candles for a net of 12 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 33.1180. This is not an overbought or oversold reading. The last signal was a buy 1 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 35.67. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 1 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 -86. This is not a topping or bottoming area. The last signal was a buy 0 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 6 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed up 0.000 at 1.250. Volume was 99% below average (consolidating) and Bollinger Bands were 3% narrower than normal.

Open High Low Close Volume___
1.250 1.251 1.248 1.250 1,877

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period     50-period     200-period
Close: 1.26 1.27 1.29
Volatility: 5 7 10
Volume: 104,093 128,995 167,674

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 3.0% below its 200-period moving average and is in an downward trend. Volatility is relatively normal 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 2 periods.

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