Pound stays vulnerable

Intermediate
  • Indecision around UK politics remains to the fore with more than just confusion regarding the path of Brexit into the end of this month, with the 31st October now looming.
  • The UK political backdrop is very fragile, with outcomes very difficult to predict for the coming days, weeks and months.
  • Our best guess is for a general election, a hung parliament and a coalition government, with Labour and the Liberal Democrats involved.
  • Although this scenario would likely make a no deal/ hard Brexit less likely, it would also been seen as a negative for the economy by financial markets.
  • This current uncertainty keeps Sterling in a vulnerable position, whilst the US Dollar is still favoured as a safe haven in the current climate, which leaves downside risks for GBPUSD.

GBPUSD: Downside risk to key 1.2231

A rebound failure Monday from just above 1.2336 resistance (from 1.2334) to leave a negative tone from last week’s plunge through 1.2391 support to confirm a Head and Shoulders Top pattern, to leave risks lower for Tuesday.

The mid-September probe above 1.2518 set an intermediate-term bull trend

For Today:                                              

  • We see a downside bias for 1.2270; break here aims maybe for key 1.2231 and maybe 1.2208.
  • But above 1.2346 opens risk up to 1.2381.

Intermediate-term Outlook – Upside Risks: We see an upside risk for 1.2784/1.2814.

  • Higher targets would be 1.3000 and 1.3184.
  • What Changes This? Below 1.2231 shifts the intermediate-term outlook straight to an intermediate-term bear theme.

4 Hour GBPUSD Chart

gbpusd

Steve Miley

Editor in chief

Steve Miley has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Market Chartist, the Editor-in...continued

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