GBP/USD Exchange Rate Forecast Lower by Three Leading Analysts
Three highly regarded technical analysts have confirmed they are bearish on GBP/USD.
The call comes as the Dollar extends its fundamentally-based cyclical journey higher - the latest boost in the trend being granted by Federal Reserve Chair Janet Yellen's positive comments about the job market when picking up an award at the University of Baltimore.
The comments have cemented expectations that the Fed is looking to raise interest rates by up to three times in 2017 - something that will command a more expensive Dollar.
The Dollar has been riding high since November on expectations for a strong fiscal stimulus to be announced by incoming US President Trump with fresh focus being placed on a border tax on imports.
“One of the least talked about but possibly most important tax shifts in the history of the United States is House Speaker Paul Ryan's and President-elect Trump's 'border tax adjustment' proposal. Put simply, the proposal would tax US imports at the corporate income tax rate, while exempting income earned from exports from any taxation. The reform would closely mirror tax border adjustments in economies with consumption-based VAT tax systems," says Deutsche Bank’s Monica Lichtner.
If enacted, Lichtner believes the plan would be extremely bullish for the US Dollar which should keep GBP/USD capped.
Latest Pound / US Dollar Exchange Rates
  | Live: 1.3337▲ + 0.08%12 Month Best:1.3789 |
*Your Bank's Retail Rate
| 1.2884 - 1.2937 |
**Independent Specialist | 1.315 - 1.3204 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
Technicals Advocate for Weaker GBP/USD
Despite the strong fundamentals underpinning the Dollar, the Pound has been rallying ever since the October flash crash lows as it recovers from oversold conditions.
Although it has pulled back from its highs over recent weeks the short-term uptrend has remained broadly intact.
Yet, several analysts see a strong possibility of a move down emerging to the 1.20-1.21 zone.
Hantec Markets’ Perry:
The first analyst advocating more downside for GBP/USD is currency broker Hantec Markets' analyst Richard Perry, who opens his analysis of the pair thus:
“Despite the support around $1.2330 so far remaining intact there is a bearish bias within the medium-term range.”
Perry goes on to say:
“The broken uptrend has not been reclaimed whilst yesterday’s bear candle has unwound Friday’s gains to put the pressure back on the supports.”
Momentum is neutral but, nevertheless, Perry sees a downside bias and a break below 1.2330 leading to a capitulation down to 1.2085.
“The early negative candle today suggests that $1.2330 could come under further pressure today, with a move below $1.2300 confirming that a test of the key range lows around $1.2080 would be the result,” said Perry.
Scotiabank’s Osborne
Scotiabank’s Shaun Osborne notes how the Pound remained unmoved by the rather positive data contained in the CBI Retail Reported Sales Data which showed a higher-than-expected rise in the index in early December.
“The CBI’s retail sales survey for December suggest UK shoppers are shrugging off any lingering Brexit concerns; the “reported sales” balance of the survey rose to 35 (versus forecasts of a drop from 26 in November to 20). December’s outcome was the strongest level for the index since September 2015.
“The data provided little or no lift for the GBP, however. Sterling is under-performing even versus the soft EUR on the day,” noted Osborne.
Then in his analysis of GBP/USD he described the Pound as “leaking lower” after breaking below the trendline drawn from the October lows last week.
He concludes a sell-off down to 1.21-1.22 as not unlikely.
“The GBP is opening up the North American session very close to the session low, below short-term retracement support at 1.2362 and at clear risk of easing further towards 1.21/1.22 in the next few days.
“Trend oscillators are aligned bearishly for the GBP across a range of short, medium and longer-term timeframes which implies ongoing downward pressure on spot and limited scope for GBP rebounds from here.
“Look to sell rallies through the low 1.24s,” says Osborne.
Commerzbank’s Jones
Karen Jones at Commerzbank is known for her accurate forecasts and she too is of the view that GBP/USD will go lower:
“We regard the consolidation phase as complete and look for a slide back to the 1.2090/85 October 11 and 25 lows.
“Intraday rallies are likely to now struggle circa 1.2540/80, and remain capped at 1.2703/72.”
“Initial support lies at 1.2302/2285.”
