GBPUSD Remains Bearish – Post BREXIT

GBP/USD

GBP/USD is currently trading at 1.3145, and is now only 145 points away from the psychologically important 1.3000 level. GBP/USD has retraced some of its recent gains, pulling back from a 9 day high, as investors await Bank of England decision and Cameron officially resigns as UK PM and Theresa May takes over. The BoE will decide on monetary policy for first time after the Brexit vote, and investors will be scrutinizing every word after Carney hinted at more easing this summer. Easing political uncertainty in the UK assisted the GBP/USD major to build on to its Monday's recovery and surge past 1.3100 handle, the pair gained traction after the BOE's Financial Stability Report discussed about lowering banks' capital buffer to ensure credit supply after the historic Brexit vote but failed to mention anything over the monetary policy action. However, markets attention will remain focused Thursday's BOE monetary policy decision, its first policy meeting since the Brexit vote. Market participant expect at-least 25 basis points of rate-cut in July and are also pricing-in possibilities of some additional quantitative easing measures during August meeting.

GBP made gains after confirmation of Theresa May as PM designate, most analysts think that price action would now be driven by Thursday’s BoE’s decision, at which expectations vary between no rate move and a 50bps cut, with our call being for a cut of 25bps to 0.25%”. 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 (breaking below 1.3000 would open way to 1.2796 and than to 1.2700 level).

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 represents strong support 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).



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 also represents strong support). On this chart I marked support and resistance levels, 1.4630 and 1.3850 represent resistance levels, 1.3000 represents strong support level. At the end of the chart we can see "bullish" candle on the 1.3000 support, this could be indication that GBPUSD could rise more ( short term traders could find good "long" position on 15 min chart but short term traders should trade with "stop loss" and "take profit" orders). As long the price is below 1.3850 resistance level there is no indication of trend reversal and this pair is in the "sell" zone ( very strong "BUY signal" would if the price jumps above 1.4300 level and than we have a open way to 1.4630 resistance level). Breaking below 1.3000 would open way to 1.2796 and than to 1.2700 level. On this chart we can also see that price has made a price gap ( gap would be fill in 90% of cases).



On this daily chart we can see that GBP/USD bottomed at 1.2796 and after that returned above 1.3000 level ( psychological support level). On this chart I marked support and resistance levels (1.3145 support and 1.3500 resistance). Breaking below 1.3140 would open way to 1.3100 and than to 1.3000 level, breaking above 1.3500 level would open way to 1.3850 level (positions for short term traders).



As political uncertainty eased following the announcement that Theresa May is becoming the new UK PM Minister, chances of a GPB/USD decline below the 1.2793 low posted last week, are limited. In fact, the 1.3000 level seems the probable bearish target and the center of an upcoming consolidative stage for Pound between 1.28 and 1.33. Strong gains are not clear at this point, and there's a high risk that advances will be seen as selling opportunities after the dust settles, with a critical resistance at 1.3533, the daily highest reached after the Brexit.