Pound Sterling to Dollar Outlook According to Tech Specialists at Soc Gen, Lloyds, CIBC and UOB

Pound Sterling to Dollar Outlook According to Tech Specialists at Soc Gen, Lloyds, CIBC and UOB

18 April 2016, 14:48
Vasilii Apostolidi
Will the pound continue to weaken against the dollar this week? We ask some leading technical analysts for their viewpoints.
The British pound has fallen against the US dollar at the start of the new week with weakness across global stock markets being seen as the culprit.

At the time of writing the conversion is quoted as being lower at 1.4189 courtesy of the pound sterling being taken to be a ‘risky’ asset owing to the downside risks posed by the June 23rd referendum on EU membership.

The ‘official’ start to the referendum campaign has begun and this week has seen a blitz of speeches, including one delivered this morning by the UK Chancellor.

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The speech comes alongside a well trailed research paper from the UK Treasury suggests that the UK economy would be 6% smaller than otherwise would be the case by 2030, should the UK exit the EU.

“The argument is predicated upon the presence of some trade barriers or restrictions should the UK vote to leave what is a customs union. Of course such long term forecasts remain susceptible to huge margins for error,” says Jeremy Stretch at CIBC in London.  

As the two sides of the EU debate risk becoming increasingly poisonous, threatening to split the Conservative party in the process Stretch notes investors continue to prefer playing Sterling from the short side.

“The lack of enthusiasm for Sterling is demonstrated by net speculative short positions reaching extremes not seen since June ’13,” says Stretch.

 Forecasts for the Pound Sterling Against the Dollar

Robin Wilkin at Lloyds Commercial:

“We remain trapped in well-defined ranges. Other than a brief move to 1.3835 in late February, the 1.4050-1.3980 area has been providing support.”

“Intra-day, while 1.4250/55 resistance caps we see risks of a move down to test support.

“A move back through 1.4255 would negate opening a re-test of the range highs at 1.4370, 1.4450 and 1.45.

“Medium term, we expect the market to continue to trade a range between 1.3850-1.35 support and 1.45-1.48 resistance.

“Should we see a breakdown through 1.35, then we have little in the way till meaningful support in the 1.2800 region.

Pound sterling to dollar exchange rate at start of new week

Stéphanie Aymes at Societe Generale:

“GBP/USD has breached a multiyear upward channel support (1.46) and looks headed towards graphical levels at 1.36/1.35 (lows of 1986, 2001, 2009).

“Long dated indicators are close to hitting a floor pointing towards the possibility of consolidation once these levels are achieved.”

1.46/1.4750 should cap short term rebound.

Quek Ser Leang at UOB in Singapore:

“While  the  undertone  for  GBP  is  positive,  the  current  price action  suggests  that  this  pair  is  still  caught  in  a  broad consolidation range.

“From here, a retest of last Friday’s high near 1.4240/45 would not be surprising but a sustained move above  this  level  is  unlikely  (next  resistance is at  1.4300).”

Support is at 1.4130 followed by last week’s low of 1.4090.

Over the one to three week timeframe we are advised that the outlook is still neutral and we continue to expect  this  pair to  trade  in  a  broad  1.4000/1.4350  range  for now.

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