Trade view /
06 July 2016 at 12:24 GMT
Sterling extended losses to fresh 31-year lows against the US dollar over the past 24 hours as fears over the consequences of the Brexit vote on the UK economy grew stronger following remarks and policy changes by the Bank of England yesterday.
GBPUSD tracked lower to 1.2797 during Asian trading. This marks the lowest level for this currency pair since September 1985.
The UK unit has been under severe pressure since the polls closed on June 23 when the electorate decided that the nation should leave the European Union (EU).
Source: www.investing.com Spotlight Ideas
The time based technicals are split and as one might expect the short-term measures are either neutral or biased toward buying sterling in the belief that in the very near term the selloff in Asia was overdone and that sterling for now is oversold.
However, I am not looking to trade GBPUSD on a short-term view...it will be too time consuming and transaction costs are likely to erode a good deal of short-term gains.
Instead I am looking to side with the time technicals that extend from five hours and one month plus...these all suggest that one should be a strong seller of sterling relative to the dollar.
Sterling has lost more than 14% of its value since the June 23 referendum and it is highly likely that the Bank of England will cut the base rate by at least 25 basis points and expand the quantitative easing purchase programme.
This has to be paired with the lack of political leadership in the Conservative government and an ineffective and divided opposition. The net result is that sterling will decline over the summer and into autumn.
Source: Spotlight Ideas
Management and risk:
Entry: Sell 1.2967 12:52 BST
Targets: 1.2513 ... 1.2234 ... 1.2008 ... 1.1782
Time horizon: Strategic Trade
— Edited by Clare MacCarthy
Non-independent investment research disclaimer applies. Read more