GBP/USD forecast - page 15
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Bullish on the pair.
Pound to Dollar Forecast: Watching the Neckline for Confirmation of Further Upside
Our studies suggest that the Pound is at risk of giving up its newfound strength while Bank of America warn that markets may be too complacent with regards to the UK's economic performance following the Brexit vote.
From a purely technical perspective the charts are still showing the formation of a bottoming pattern in the GBP/USD exchange rate following the Brexit sell-off.
This still looks like a double-bottom, with an eventual upside target at 1.3800 being possible.
Whilst this seems to suggest an acceleration in strength for the Pound versus the Dollar, it is only dependent on a break above the pattern’s neckline at 1.3400.
Whilst the exchange rate remains below this level, there is still a possibility of further declines taking us back down into the 1.20s again.
In fact, if we look now at the 4-hour chart (see below) we can see that the pair has broken bearishly down below a key trendline after forming a big bearish candlestick:
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British Pound v Euro and US Dollar: September Data Could Unleash the Coiled Spring
September brings with it two important pieces of UK economic data releases which could trigger a break-out in Pound Sterling with one analyst telling us the move will likely be lower.
GBP retains a positive bid against its G10 competitors ensuring the strong second-half to August is cemented.
With UK economic data having provided a windfall to Sterling of late, there will be nerves that this uptrend in GBP could be rudely undermined on Thursday when we receive the first hard data releases of the new month.
Manufacturing PMI is released on Thursday the 1st with markets anticipating a reading of 49.0 while on Friday Construction PMI is forecast at 46.1.
Expectations are low following the August releases so any beat of the forecast figures could well see GBP extend recent gains.
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British Pound's Strength Against Euro and Dollar to be Temporary Warn Analysts
Despite Pound Sterling's strong recovery against its major counterparts we continue to be told by some institutional researchers not to expect the trend to continue.
GBP has shot higher on global FX markets following a surprisingly strong data release concerning the UK's manufacturing sector.
The data reinforces a trend of markets and economists being shown to have overestimated the negative impact of the June Brexit vote.
Some are also suggesting that the Bank of England was wrong to have acted so agressively on cutting rates and boosting quantitative easing without having had more data to based their decisions.
This suggests that the prospect of further rate cuts at the Bank are greatly diminished which is ultimately a great positive for Sterling going forward and could fundamentally shift the outlook onto a firmer footing.
Technically speaking, the key GBP exchange rates remain biased to lower levels:
“The market remains confined to an intense downtrend and is in the process of consolidating just off the recent +30-year low from July. Any rallies are classified as corrective ahead of what should be the next major break below 1.2800 and towards 1.2500,” says a note from LMAX Exchange Research and Analytics.
LMAX believe that only once GBP/USD returns back above 1.3372 will we see the immediate pressure taken off Sterling that will force a shift in the chart’s structure.
One feels that it is a matter of time before the market shifts into a bullish setup.
However, we are told by others that the move higher in GBP is technical in nature and is without substance.
"While we have seen Sterling rebound we would the bounce as largely just short covering and likely to be temporary. Indeed we would argue that the data may embolden those within government looking for a hard Brexit, in the process ignoring single market access - harming medium run growth assumptions," says Jeremy Stretch at CIBC Markets.
In the wake of the manufacturing rebound CIBC say they would be wary of markets becoming over ambitious as regards an expected rebound in construction PMI due on Friday.
"Despite such concerns we would look for EUR GBP to correct back towards 0.8350," says Stretch.
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Outlook for the Pound to Dollar Rate: GBP/USD Poised Higher
GBP/USD is forecast to break higher after forming a reversal pattern on the charts while UK data releases in the week ahead could confirm the economy to be holding up surprisingly well following the Brexit vote.
The GBP/USD pair has risen in the last week following broadly positive data for the UK economy, which seems to have established that the immediate aftermath of Brexit has not been as bad as many had imagined.
Data over the last few weeks has shown a robust rise in Retail Sales, a positive result for Business Investment and now strong Manufacturing and Construction PMI’s for August.
Traders have responded to this by buying the pound, which has pushed up the GBP/USD exchange rate.
The dollar, meanwhile, lost ground after Non-Farm Payrolls (NFPS) on Friday failed to hit the 180k extra jobs expected, coming out at 151k only, this added further impetus to the up move in GBP/USD.
The NFP fail reduced bets the Federal Reserve would raise interest rates at their September meeting but nevertheless kept the torch flame burning for a December hike, which has now actually risen from 42% probability to 44% for a 0.25% hike.
From a technical perspective the GBP/USD chart is also showing more upside potential after completing a double-bottom reversal pattern at the lows
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British Pound Retains Advantage on US Dollar, Euro as Services PMI Gives the Feel-Good Factor
GBP trades above the 1.33 level against the Dollar and 1.19 level against the Euro thanks to a continued run of better-than-anticipated UK economic reports.
Pound Sterling continues to outperform its two biggest rivals courtesy of solid UK data and a continued repositioning within the foreign exhange markets that sees traders continue to exit their short-Sterling positions.
Services PMI data from IHS Markit and the CIPS have confirmed the economy's largest sector expanded in the month of August, putting behind it the slump seen following the UK's vote to leave the European Union.
The data read at 52.9, well ahead of economist forecasts and market positioning that expected a reading of 50 to be delivered. This was the strongest rise in over 20 years.
Estimates shown to us by Nordea Markets confirm the UK will avoid recession as the Composite Index (construction + services + manufacturing) now reads at 53.6 for August.
According to analysts, this is consistent with GDP growth at 0.3% quarter-on-quarter for the third quarter.
"The City echoed to the sound of economic forecasts being revised, as the UK’s all-important services PMI came in ahead of expectations, matching the rebound posted by manufacturing last week. The immediate fears of an economic apocalypse have receded, with activity, job growth and confidence all holding up well," says Chris Beauchamp at IG in London.
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