Fundamentals are starting to weigh more heavily on the pound
The specter of a Brexit without agreement and of a more accommodating BOE are reasons which are likely to weigh more and more on the pound in the coming weeks, as we saw above.
As the risks of Brexit return, the pound seems to be moving towards a revisiting of familiar but troubling territory against the dollar – near the 1.2000 mark. The pressure from short-term rates on the possibility of a further rate cut by the BOE will only add to this.
From a technical point of view, the cable also experiences difficulties and continues on its downward momentum after the double-top model around 200 days MA (blue line).
May has not been a good month for consideration in this regard.
The technical break below the April low of 1.2166 (also a rise in EUR / GBP) towards the end of last week only exacerbates the pound’s problems for the time being.
For the time being, buyers are able to keep their heads just above 1.2100 to start morning trading in Europe (after falling earlier), but the pound is still facing major headwinds if it attempts to take on an upward challenge.
As things stand, balancing risks favors sellers and buyers have a lot of work to do.
The first step is to try to get back above the April low of 1.2166, but even then, I would say the “Sell on rallies” poster is pasted everywhere right now.
And that should apply as long as the BOE follows its rhetoric and we continue to expect Brexit negotiations to continue, i.e. June 30.