Central banks in the Eurozone, Japan, Switzerland, Australia and New Zealand all appear to be evaluating further monetary policy easing. So is the Bank of England, but with the US Federal Reserve looking to hold its ground, and perhaps even tighten this year, GBPUSD looks to be the best way to bet against the pound.
Yesterday’s better-than-expected inflation numbers out of the UK were outweighed by gloomy economic forecasts from the International Monetary Fund, leaving GBPUSD on the back foot. Today’s labour market data will provide more clues as to just what the situation is post Brexit. It’s a quiet week for data in the US and Federal Open Market Committee members have gone into lock-down ahead of their policy review meeting next week. Market pricing for a rate hike by December continues to hover around 50/50.
Management and risk description
From an Elliott Wave perspective, my medium-term target for sterling still lies at 1.1630 (refer to my weekly chart below).
In the short term, GBPUSD has completed a minor Head and Shoulders continuation pattern structure, wherein while Neckline resistance (currently about the 1.3180 level) contains, sterling is likely to sell-off toward the mid 1.2700s over coming days.
Entry: today, GBPUSD is seen as a sell at 1.3150/1.3180.
Stop: 1.3206, initially.
Time horizon: allow several days for target to be met.
GBPUSD hourly (click to expand)
GBPUSD weekly (click to expand)
— Edited by Gayle Bryant