CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

GBP USD could be heading towards 1 30s again

Article By: ,  Financial Analyst
January 18, 2017 4:18 PM

UK Prime Minister Theresa May’s comments about how the UK will leave the EU were well-received by traders yesterday as she confirmed that Parliament will debate the final Brexit deal. As a result, the GBP/USD had its best day since 2008 as it surged from around 1.20 to 1.24 in a matter of hours. But the cable has eased back somewhat sharply in the first half of today’s session despite news of stronger UK jobs and wages data and yesterday’s stronger CPI print.

At first glance, the pound’s reaction suggests that Theresa May’s comments merely triggered a short-squeeze rally rather than cause a change in the trend. This argument makes more sense when you consider the fact US President-elect Donald Trump’s inauguration is on Friday and not many people will be willing to have any bold positions on the dollar ahead of it, especially bearish bets.

However, I do believe that the pound may have carved out a bottom for the time being and thus expect to see at least some sort of consolidation at these levels. I think most of the negative news may already be baked in the price. Also, with incoming UK data pointing to higher inflation and growth rates, the impact of the Brexit vote has so far been positive if anything. Market participants may therefore find it difficult to justify initiating new sell positions on the currency at these already-depressed levels. Consequently we may see the pound regain its poise as we approach the London close.

In the slightly longer-term outlook, the cable may be able to climb back towards 1.30s again if it manages to break through the 1.2415 resistance level. Though a bit too early, the GBP/USD may have created a major double bottom reversal pattern around the psychologically-important 1.20 handle. The fact that price moved away from this level points to significant buying pressure. That being said, if we create a new low below 1.20 then this view is obviously no longer valid.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024