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May 14 - 08:36 PM

GBP/USD - COMMENT-Setup A Recipe For Lower GBP/USD - Sell On Strength

By Andrew M Spencer  —  May 13 - 09:05 PM

Cable is edging towards the base of its 1.2166-1.2648 range since late March, as the UK news turns more negative. PM Johnson's popularity has been hit by his government's coronavirus performance nL8N2CV44Z. UK economic data is fulfilling dour expectations nL8N2CV2SP, the BOE is ready for further QE and fears a second wave of infections nL8N2CV7IK.
On the USD side of cable, though the correlation between lower risk appetite and USD strength is weak on a daily basis, it holds longer term. Fed Chair Powell expects an "extended period" of weak economic growth nU5N2BQ002, the WHO warns that "this virus may never go away", like HIV nL8N2CV6UU, and U.S.-China friction simmers nL1N2CV1M0. Thus a slow global recovery looks most likely, even if a second wave of the virus is avoided.
In this scenario, safe-haven flows should keep the USD resilient, while the UK looks fragile, especially as Click here .
GBP/USD edges toward the pivotal 1.2166-76 range base, the April low and 38.2% of the March-April rise. The lower 21-day Bollinger band, at 1.2210, has been a base and is a good indicator of an oversold market, which favours selling strength not breaks.
A close below 1.2150 would bring 1.1885, 61.8% of the March-April bounce, then the 1.1413 March low into play.

gbp may 14 Click here

Refinitiv IFR Research/Market Commentary


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