Bank of England Governor Mark Carney has indicated his preference for an easing of monetary policy sometime over summer but we will have to wait until the BoE’s policymaking Committee meets on July 14 to see how much support he has.
Markets assume a cut to the 0.50% bank rate is a done deal. With no news on that front likely this week, attention for GBPUSD traders will turn to Friday’s jobs report out of the US. After last month’s shocker anything could happen, but expectations are of a return to the previous monthly average of around 190,000. Anything wide of that mark will prompt a USD-driven move in GBPUSD.
Meanwhile, markets are pricing very little chance of a rate hike by the Federal Reserve this year.
Management and risk description
Sterling has digested the initial shock of “Brexit day” and with market sentiment still predominately bearish, while holding near support around the 1.3230 level, there is potential for a decent corrective recovery for GBPUSD.
From an Elliott Wave perspective, I am anticipating an “irregular” corrective structure to develop from last Monday’s 1.3120 low. This would enable a rally back toward the low 1.3600s, en route to the mid/late 1.3800s over coming days (see daily chart below).
A loss of 1.3230/1.3200 however would herald a swift retest of the 1.3120 low, then the resumption of GBPUSD’s medium-term downtrend toward 1.2850 (see weekly chart below).
Entry: bought GBPUSD at market (1.3278).
Stop: 1.3224, initially.
Target: 50% at 1.3604 and 50% at 1.3841.
Time horizon: allow several few days for targets to be met.
GBPUSD daily chart (click to expand)
GBPUSD weekly chart (click to expand)
Source: ThomsonReuters. Create your own charts with SaxoTrader; click here to learn more
— Edited by Gayle Bryant