It all started with the dollar’s progress two weeks ago, before a fall below 1.2500 made things really difficult for GBP/USD. There was a brief phase of consolidation below the indicated level, but we see sellers regaining momentum over the last couple of days. And now the pair is down another 0.4% at 1.2315.
From a technical standpoint, there is very little support to stop the decline here. The next key support target will be the October low itself, at 1.2037. That’s still almost 300 pips from here.
Unless the musical mood changes with the dollar, it might be difficult to argue otherwise. This is despite recent UK inflation data, as was argued here last week.
While the BoE is still set to cut rates in August, the Fed’s timetable has been readjusted quite significantly. We’re potentially looking at one in September, but even that isn’t as obvious as the August BOE. And that pretty much describes the current balance of risks for the dollar and the pound.
I mean, if the British pound can’t even rally, even with better risk sentiment today, that’s not a good sign in the short term, especially with the chart as it is above .
This article was written by Justin Low at www.forexlive.com.
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