Deprecated: Function get_magic_quotes_gpc() is deprecated in /home2/sharonox/public_html/wp-includes/formatting.php on line 1828

GBPUSD Analysis – bearish potential remains strong

By Allan Perry August 15, 2016
GBP/USD

The GBP/USD pair continued to weaken, further decline is envisaged in the days ahead. Fears are increasing that the UK's separation from the EU may take quite a bit longer than anticipated. Indeed, insiders now claim that the UK is not ready for the negotiating stage of the exit and as a result Theresa May may postpone invoking the formal procedure, which was until now largely expected to happen in January 2017. As it currently stands, formal exit proceedings may only begin at the end of next year and last until Q4 2019. During the upcoming days, the kingdom will release several macroeconomic indicators, including inflation, employment and retail sales data for after the Brexit referendum, which will probably add fuel to the fire, with high chances of final results missing already depressed expectations.

The greenback weakened against other major currencies (except versus the British pound) on Friday as release of disappointing U.S. retail sales reports, producer prices and a guage of consumer sentiment raised concerns about the strength of third-quarter economic growth, however, short-covering ahead of weekend holiday helped dollar to pare intra-day losses. The US retail sales figures disappointed, raising doubts as to whether the Federal Reserve will increase interest rates this year. US retail sales were unexpectedly flat in July. The reading followed an upwardly revised 0.8% increase in June, the Commerce Department said. Retail sales in June were previously reported to have increased 0.6%. The market had forecast overall retail sales rising 0.4% in July. Interest rate futures after Friday's data placed only a 43% probability of a December rate hike, compared to 47% before the data.

GBP/USD still lies within a downtrend channel. The pair is trading below 1.3000 and the bearish momentum remains lively. First resistance is located at 1.3000. The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline.

Technical analysis

When we look at the monthly chart of this pair ( 12 years period) we can see strong " bearish" correction. On this monthly chart I marked support and resistance levels, 1.7000 and 1.4300 are long term resistance levels, 1.3000 also represents now strong resistance level. As long the price is below 1.4300 resistance level there is no indication of long trend reversal and this pair is in the "sell" zone ( there could be a short term jump but first "BUY" signal would be if the price jumps above 1.4300 level). At the end of the chart we can see strong "bearish" candles, the pair is trading below 1.3000 and the bearish momentum remains lively.

gbpusd1

The GBP/USD pair continued to weaken, further decline is envisaged in the days ahead. Fears are increasing that the UK's separation from the EU may take quite a bit longer than anticipated. On this weekly chart we can also see that major trend is "bearish", price has dropped from 1.7000 level to 1.2796 level ( this level represents now strong support). On this chart I marked support and resistance levels - 1.4630,1.3850 and 1.3000 represent resistance levels, 1.2800 and 1.2796 represent strong support levels. On this chart I marked trend line and as long the price is below this line there is no indication of trend reversal (The pair is trading below 1.3000 and the bearish momentum remains lively, at the end of the chart we can see "bearish" candles, this could be indication that GBPUSD could fall more ( short term traders could find good "short" position on 15 min chart but short term traders should trade with "stop loss" and "take profit" orders, 1.2800 and 1.2796 could be "bearish"targets). Breaking below 1.2800 would open way to 1.2796 and than to 1.2700 level, 1.3000 represents now strong resistance level. During the upcoming days, the kingdom will release several macroeconomic indicators, including inflation, employment and retail sales data for after the Brexit referendum, which will probably add fuel to the fire, with high chances of final results missing already depressed expectations.

gbpusd2

Deprecated: Function get_magic_quotes_gpc() is deprecated in /home2/sharonox/public_html/wp-includes/formatting.php on line 1828
By Allan Perry August 15, 2016

Latest from MarketsDaily