- In our Monday report we highlighted ongoing Sterling weakness as Brexit talks between the Conservative and Labour parties have floundered amid the increasingly unstable position of Prime Minister (PM) Theresa May.
- The GB Pound did try a recovery on Tuesday (21st May) as PM May tried to bring a new version of her Brexit deal, but a lack of perceived support for this deal has seen Sterling selloff again.
- Furthermore, FX markets are still dominated by a strong US Dollar as a safe haven, during the current “risk off” phase, driven by Trade War concerns.
- Today we spotlight Pound weakness against both the US Dollar (the GBPUSD Forex rate) but start with the negative tone versus the Euro (the EURGBP cross currency pair).
EURGBP risk still higher
A very erratic Tuesday with PM May’s new Brexit deal presented and somewhat rejected, producing a dip a firm rebound off of .8724 support, sustaining bull forces from the entire, very strong May bull run, to keep risks higher for Wednesday.
The May surge up through .8723 set a Quadruple Bottom and intermediate-term bull trend.
- We see an upside bias for .8789/91; break here aims for .8815 and .8840, maybe towards .8866.
- But below .8740 opens risk down to .8725, maybe .8700 and ,8680.
Intermediate-term Outlook – Upside Risks: We see an upside risk for .8840.
- Higher targets would be .9000 and .9110
- What Changes This? Below .8624 shifts the outlook back to neutral; through .8472 is needed for a bear theme.
Daily EURGBP Chart
GBPUSD bear trend intact, rebound rejected
A spike higher Tuesday through resistances as high as 1.2795/98, but then a failure back from 12814, to hold onto bear forces from the significant selloff since the early May failure from below our 1.3081 resistance (from 1.3047), to keep risks lower for Wednesday.
The latter April probe below 1.2947 signalled an intermediate-term Double Top pattern and set an intermediate-term bear trend, BUT risk is now for a break above 1.3196 for an intermediate-term bull shift.
- We see a downside bias for 1.2683 and key 1.2668; break here aims for 1.2616.
- But above 1.2814 aims for 1.2853and maybe opens risk up towards 1.2880.
Intermediate-term Outlook – Downside Risks: We see a downside risk for 1.2771.
- Lower targets would be 1.2437, 1.2366 and 1.2109
- What Changes This? Above 1.3047 shifts the outlook back to neutral; above 1.3177 is needed for a bull theme.
4 Hour GBPUSD Chart