GBP/USD poised for breakdown

Despite a lagging US dollar in recent days and weeks that has been dragged down by dovish signals emanating from the words of Federal Reserve officials, sterling has been even weaker. Weakness in the pound, which has fallen considerably as of late against other major currencies, including the dollar, euro, and yen, has been brought on not only by a rather consistently dovish Bank of England, but also by a looming June referendum that draws ever closer, in which the UK will decide whether or not it will remain in the European Union.

Due in part to speculation over this potential "Brexit," GBP/USD has continued to trade in a weakened state, consolidating not far above its near-7-year low below 1.4000 that was just established in late February.

Arguably, the currency pair has only been able to stay afloat in recent weeks because of the fact that the dollar has undergone its own beating from the Fed’s seemingly intensifying dovish stance. This increasing dovishness stands in sharp contrast to the central bank’s clearly hawkish leanings towards the end of last year, and more closely aligns the Fed to the Bank of England’s continuous postponement of its own monetary tightening objectives.

A week from this writing, the Bank of England will announce its official bank rate and monetary policy summary. Although the central bank is not expected to change interest rates at that meeting, the policy summary will, as always, be scrutinized closely for any clues as to the bank’s stance on interest rates going forward.

From a technical perspective, GBP/USD appears once again to be poised for a potential breakdown below the key 1.4000 psychological level. With any further breakdown below February’s noted multi-year low of 1.3835, a continuation of the long-term downtrend will have been confirmed, with the next major downside target considerably lower at the key 1.3500 support level.

Disclaimer: The information on this web site 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. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

OPEN AN ACCOUNT