GBP/USD: Cable Drops To A New Yearly Low

After a rollercoaster couple of weeks, the twists and turns on the GBP/USD journey finally showed some signs of slowing down last week. Saying that, the GBP/USD still dropped to another yearly low on Wednesday morning at 1.5589 as investors priced in a dovish Bank of England (BoE) Minutes release. On Thursday, the pair received a boost when UK Retail Sales increased by an annualised 4.6% and this resulted in the GBP/USD climbing as high as 1.5721. Although expectations for an upcoming interest rate rise have been pushed back for up to a year and there are signs of UK economic momentum slowing as the BoE previously suggested, the robust retail sales performance is a reminder to investors that the UK fundamentals remain strong.

The problem with the GBP/USD at the moment is that with optimism for an interest rate hike next Spring now appearing to be nothing other than wishful thinking, and with the UK general election campaigns for next May are starting to get attention, investor attraction towards the GBP/USD is limited. In order for the pair to continue its decline, it would either require further signs of UK economic momentum slowing down or increased demand for the USD. Although both shouldn’t be ruled out, some sort of consolidation for the pair after such a period of heavy selling seems more likely. With investor attraction to the GBP being low, USD weakness would be required for the pair to move to the upside.

In reference to the technicals on the Daily timeframe, the GBP/USD is continuing to trade in the same falling wedge pattern it has found itself inside recently. If profit-taking on the USD encouraged the pair to move to the upside, resistance can be found located around 1.5712 and 1.5736. Downside movement can find support around 1.5626 and 1.5589.


Disclaimer: The content in this article comprises personal opinions and ideas and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime Ltd, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability as to any loss arising from any investment based on the same. There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.