GBPUSD Analysis

Right we have a new PM here in the UK and I thought it would be a good idea just to do a little technical analysis on the pound. 

In terms of general trend lines and points of support, we are starting to enter territory which we haven't seen since 2017. Whilst the markets have a long memory, I am not entirely certain about how much confidence we can have in previous support levels. 

You don't have to be a chartist to see that the pound is moving down. However, I am interested in the four hour time frame triangle which is forming and holding well. 

Given that there will not be much news related to GBPUSD and Brexit while Parliament is in recess, it is worth noting that further aggressive pushes to the downside, in my opinion, remain unlikely. For now. 

However, we must also remember that in the week ahead we have the BOE rate decision and if they decide to cut (which is highly unlikely - according to Bloomberg, out of 24 analysts only one anticipates a cut, and we have to bear in mind previous hawkish comments from Carney) we will probably see significant pushes downwards towards the 1.23 handle. 

We also have to consider the Fed on Wednesday and the anticipated cut could cause a brief push up towards 1.245 on the back of algorithmic selling of the dollar on the news. However, I fully anticipate the dollar to return to its current level of strength as this rate cut is entirely expected. 

On the other hand, if the Fed holds, the dollar will appreciate markedly against all other currencies, oil will fall, gold will fall, stocks will fall etc. 

Again, in this unlikely case, the £ will probably fall to the 1.23 handle. 

Looking more longer-term on the pound, I am quite bullish. I do not believe we will (or that it is possible to) leave the European Union without a deal when we share a land border with the EU. Ultimately, this means we either get a deal in which case (dependent on deal) the pound could push to $1.40 or maybe even higher. Alternatively, we have a second referendum and then a remain win would push the pound higher still. 

However, the outlook worsens dramatically if we have a people's vote and then No Deal wins - this would be catastrophic and the pound would collapse. Again, I see this as being highly unlikely. 

Ultimately, my medium-term forecast (over August and September) is that the pound will appreciate a little on the back of the low news coverage - my forecast remain 1.27 ish. 

However, as the negotiations heat up in September and October, I can expect the pound to fall again to its current levels until the next inevitable Brexit delay.