Short term
Trade view / 20 July 2016 at 1:31 GMT

Anticipating the next decline for GBPUSD

Managing Director / Technical Research Limited
New Zealand

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. 

Target: 1.2769.

Time horizon: allow several days for target to be met.

GBPUSD hourly (click to expand)
GBPUSD hourly chart

Source: ThomsonReuters  

GBPUSD weekly (click to expand)

Source: ThomsonReuters.   

— Edited by Gayle Bryant

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Non-independent investment research disclaimer applies. Read more
20 July
HaythamSabry HaythamSabry
Hi Max, is this trade still on after the recent data release?
20 July
brian1983 brian1983
so at 1.318-1.319 is it safe to short GBPUSD?
20 July
Allied Allied
Assuming that this trade idea failed and it was stopped out for a 56 tick loss ?
20 July
Max McKegg Max McKegg
1.3150-1.3180 was the Selling area Yesterday, 1.3206 the Stop. Very interesting technical picture and will Update Today if able OK
21 July
Max McKegg Max McKegg
My Updated Analysis of GBPUSD & EURGBP appear below (click to expand). These are the positional trades which I am focussed upon.


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