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British Pound: USD/GBP (GBP=X) pulling back in established downtrend

British Pound: USD/GBP (GBP=X) pulling back in established downtrend

The GBP/USD rate is trading at 1.2733 at the start of the new trading week, only marginally higher than the week before as relentless Sterling weakness turned to strength following the resignation of Prime Minister Theresa May, leading to a U-bend in the downtrend.

The reaction could have been reflective of a familiar market behaviour of ‘sell the rumour; buy the fact’ – in which traders sell on expectations of a negative outcome and as a consequence the price goes down so much that when the actual news hits the wires the currency is actually left looking relatively cheap, and it starts going up again.

Another reason put forward for the Pound rising after May announced her resignation was that it reduces the ‘uncertainty’ that was May’s future.

From a fundamental point of view May’s resignation is only the first step towards the probable swearing-in of a more leave-orientated politician, increasing the chances of a ‘no-deal’ outcome, substantially, and probably leading to more downside for the Pound.

The technical picture is also quite bearish: the pair is in an established and intact downtrend which is likely to extend.

Whilst Friday’s rebound marked the first sign of hope that the relentless downtrend might be reaching a conclusion, it was by no means strong enough to suggest a reversal and further declines are expected eventually. At the most, it is probably the start of merely a sideways market – a pause before the onset of more weakness.

Overall, the bias in prices is: Downwards.

By the way, prices are vulnerable to a correction towards 1.29.

The projected upper bound is: 1.28.

The projected lower bound is: 1.25.

The projected closing price is: 1.27.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 18 white candles and 32 black candles for a net of 14 black candles.

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 45.2794. This is not an overbought or oversold reading. The last signal was a buy 2 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 31.46. 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 2 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 -71. This is not a topping or bottoming area. The last signal was a buy 2 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 11 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed up 0.000 at 1.268. Volume was 95% below average (consolidating) and Bollinger Bands were 64% wider than normal.

Open High Low Close Volume___
1.268 1.268 1.267 1.268 8,234

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

Moving Averages: 10-period 50-period 200-period
Close: 1.27 1.30 1.30
Volatility: 6 7 10
Volume: 123,840 154,422 175,000

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 2.1% below its 200-period moving average and is in an downward trend. Volatility is low 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 9 periods.

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