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Jun 30 - 11:55 PM

GBP/USD - COMMENT-Sterling Bounce Is An Opportunity In The Downtrend

By Andrew M Spencer  —  Jun 30 - 09:45 PM

Sterling's strong 0.8% rebound from a 1.2258 low on Tuesday, reached after the worst UK GDP result in 40 years nL8N2E714Z, provides an opportunity as it was caused by month-end rebalancing, rather than a sea change in sentiment.

The situation in the UK offerslittle basis for a sustained GBP recovery.
The coronavirus has not been fully contained in England, as the renewed lockdown of the city of Leicester illustrates, while other parts of the country unwind restrictions nL8N2E71BA.
PM Johnson's policy to "build, build, build" raises fears that speedy infrastructure spending decisions may not provide long-term value nL8N2E71P5.
Brexit talks continue, but the EU and UK government are fundamentally at odds, with the EU's Barnier calling British financial market proposals 'unacceptable' nL8N2E775E, as both sides prepare for a hard Brexit.

Sterling is trading 0.2% lower in Asia, reversing off pivotal resistance at 1.2403/05, which is the 10-day moving average that capped during the June decline, and the top of a downward trend channel drawn from the 1.2812 June high.
Shorts in the current 1.2385 area with a stop above 1.2420 would provide solid risk-reward, looking initially for another test of 1.2249, 76.4% of the May-June rise, which has been a base this week.

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Refinitiv IFR Research/Market Commentary


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