Steve Miley

Wed, Aug 14

US Dollar rebound reinforces GBP/USD vulnerability

Global financial markets saw an easing of trade tensions on Tuesday, with the US declaring a delay to the setting of new tariffs until 15th December 2019, plus a near term resumptions in trade negotiations with China.

Riskier assets were sent higher in price, with share markets rallying whilst safe havens like the Japanese Yen and Gold went lower (USDJPY surging higher).

Additionally, this trade war development produced a general rebound in the USD against other major currencies, given the prospect of a less dovish Fed.

This sets the short-term outlook for US Dollar positive and with ongoing No Deal Brexit tensions, here we spotlight bear risks for Cable (GBPUSD).


GBPUSD Downside Risk

A roll lower Tuesday to reject Monday’s bounce (above minor 1.2093 resistance), with a stall notably below the 1.2148 resistance level (from 1.2107) and whilst below this new resistance we still see negative pressures from last week’s plunge lower through multiple supports to a new multi-year low, to keep risks lower for Wednesday.  The latter April push below 1.2947 signalled an intermediate-term Double Top pattern and set an intermediate-term bear trend.


For Today

We see a downside bias for 1.2039 and 1.2013/00; break here aims for 1.1955 and 1.1903/01.

But above 1.2093 opens risk up to 1.2148, which we would look to try to cap.


Intermediate-term Outlook - Downside Risks

We see a downside risk for 1.2000.

Lower targets would be 1.1866 and 1.1755

What Changes This? Above 1.2250 shifts the outlook back to neutral; above 1.2518 is needed for a bull theme.

You can see more from Steve Miley, Academic Dean for the London School of Wealth Management and Kylin Prime Capital Senior Investment Advisor, here on FX Explained