GBP/USD Rate: Strong Support at 1.3025, US Consumer Confidence Sees USD Retain Strength
A look at the views of our favoured technical FX analysts shows a predominantly bearish outlook for GBP/USD, however the extent of any losses will be limited by a hefty zone of support.
The Pound to Dollar exchange rate trades around the 1.31 fulcrum heading into the mid-week session.
The UK currency has actually impressed with its ability to avoid suffering major losses against the US Dollar which retains a strong bid in light of the previous week's Jackson Hole event and some good domestic data.
Of note, US consumer confidence rose to its strongest level since September 2015.
"These positive reports along with Monday's personal income and spending data helped provide momentum for the dollar's rally," says Kathy Lien, Director at BK Asset Management.
GBP/USD has meanwhile been showing signs of recovery on the back of better-than-expected data out of the UK.
However, just as things were looking up for the pair weakness set in and pulled the pair back into a longer-term consolidation.
What is the outlook for the pair now, we ask?
Here are the views of several analysts on the subject.
Lloyds Commercial Banking’s Robin Wilkin sees the pair now ‘back in the range’:
“We expect range trading to persist ahead of more significant event risk later in the week.”
As far as flags in the ground, Wilkins earmarks 1.3025 for support:
“Support initially lies at 1.3025, followed by 1.2880/50. A break of these would open a test of trend channel and post-referendum low support at 1.28.”
Then upside is capped by resistance at, “1.3250/80 and 1.3306 (early August high). A move above these may expose 1.3480 (mid-July highs).”
Latest Pound / US Dollar Exchange Rates
  | Live: 1.3336▲ + 0.07%12 Month Best:1.3789 |
*Your Bank's Retail Rate
| 1.2882 - 1.2936 |
**Independent Specialist | 1.3149 - 1.3203 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
Swissquote’s Yann Quenlann is more bearish, stating: “Expected to show continued weakness.”
Nevertheless, they see it as a plus that the pair is still trading, “above 1.3000.”
The FX analyst places markers in the ground at the following levels:
“Hourly resistance can be found at 1.3279 (26/08/2016 high) and 1.3372 (03/08/2016 high).”
In concurrence with Lloyds’s Wilkins, Quenlann also sees key support at 1.3024/5:
“Hourly support can be found at 1.3024 (19/08/2016 low).”
Scotiabanks FX Stretgist Shaun Osborne is overall bearish, opening his analysis with the following remarks:
“The GBP retains a weak technical undertone.”
Adding:
“The broader pattern of trade has settled into a sideways range effectively since June and near-term risks are negative for the GBP following the heavy price action seen in the latter part of last week (intraday and daily bear reversals signaled) near the upper end of the recent trading band.”
Osborne sees a “grind lower” to 1.29/1.30.
EUR/GBP Technical Views
Lloyds are looking for a top in EURGBP.
“The pair continues to hold the 0.8560/80 region, with rallies yesterday and today capped ahead of this resistance.” Remark their analyst Robin Wilkins.
Adding that a break below 0.8560/80 would be critical in calling a ‘top’.
“While under, we look for a break of highlighted support to signal the top we are looking for is in place, for a decline back towards the 0.80 region in the coming weeks (a move through 0.8430 and 0.8350/00 support levels would add conviction to this view).”
Only a, “rally back above 0.8580,” would negate the bearish view and, “suggest a run at 0.8800 is still possible.”
Lloyds are of the opinion that downside in sterling in general is nearing its finale.
“Long term, in conjunction with the GBPUSD view above, we believe this move to the topside is the last within the correction from the
0.70-0.69 support region. We are still looking for stronger signs of a top developing.”
Swissquote’s Yann Quenlann is in contrast, more bullish see further upside as quite possible.
“EURGBP is back below 0.8600. The short-term technical structure remains positive. Hourly resistance is given at 0.8724 (16/08/2016 high) and hourly support is located at 0.8518 (10/08/2016 low).”
Long-term they are bullish:
“The pair is currently recovering from recent lows in 2015. The technical structure suggests a growing upside momentum. The pair is trading far above from its 200 DMA. Strong resistance can be found at 0.8815 (25/02/2013 high).”
