Tuesday September 20, 2016 - 14:03:30 GMT
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Does the GBPUSD Break of 1.30 Signal a New Leg Down?
The British pound has remained under selling pressure following Friday’s slide after an early Monday bounce failed to follow through. This has it trading back below the pivotal 1.30 level, only the 14th day (including Monday’s 1.2999 low) in the 63 trading days since the vote to Brexit on June 23. What is interesting is that the 12 prior days trading below 1.30 came in streaks of 5 consecutive days in early July and 7 days in a row in mid-August. The rest of the time it has traded above 1.30.
Our GBPUSD tracking poll continues to show a bias to the downside with 58% of respondents seeing it ending the year below 1.30.
In any case, this has seen a scramble to explain the renewed selling of the pound which has been trading within a 1.2798-1.3533 range (most of the trading between 1.29-1.34) since the Brexit vote. One explanation is the focus on Brexit with renewed concerns over the political and economic risks associated with leaving the EU pressuring the currency.
This is another explanation from one of our poll participants, who put it simply:
Sterling is likely to remain soft due to central bank divergence. Expectations are leaning to the Fed raising interest rates in December, the ECB to stand pat the rest of the year and the Bank of England potentially easing again in November.
Whatever the reason, the GBP has come under selling pressure out of its crosses, most notably vs. the EUR today (vs. the JPY as well). A look at the EURGBP one hour chart suggests one source of GBP selling.
A look at the 4 hour chart puts the current upswing iin perspective as it is still well below the .8724 peak reached in August.
The chart also shows the importance of recognizing how cross flows can influence the spot market. In this regard, GBPUSD is weaker today while EURUSD is currently about unchanged after trading firmer earlier in what I describe as a typical tug-of-war. How to use this information is explained in our exclusive report, How to Use Crosses to Trade Spot FX, an invaluable resource in today’s trading world that is given in appreciation to all those who participate in our poll. .
Click to participate in our GBP/USD poll
Jay Meisler, founder
Global Traders Association
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