GBP/USD forecast - page 20
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• Log: 1.3024 (market)
• Stop: 1.2983
• Take profit: 1.3089
• Time for execution: 1 day
British Pound in Fresh Dip Against Euro, Dollar as Deutsche Bank and Commerzbank Shares Take Fresh Tumble
A sudden tumble in German banking shares late in the Thursday trading session hit Pound Sterling just as it was looking to recover, however, we note downside for GBP should be limited as per our technical studies.
Sterling has fallen back from recent highs in line with a softening of global investor sentiment.
The 'risky' Pound has shown over the past week that it is highly sensitive to negative investor sentiment, particularly that related to concerns over the health of Germany's Deutsche Bank and now Commerzbank.
Sterling's current account deficit leaves Sterling highly dependent on foreign exchange inflows; when market sentiment sours that supportive inflow ceases.
On the other hand, the Euro tends to benefit as global investors liquidate investments and repatriate the currency.
Detusche Bank and Commerzbank to the Fore
Markets turned sour late on Thursday following reports that a number of funds that clear derivatives trades with Deutsche Bank AG have withdrawn some excess cash and positions held at the lender.
Analysts say this is a sign of counterparties’ mounting concerns about doing business with Europe’s largest investment bank.
The Deutsche Bank share price slid on the news, taking global investor sentiment, and GBP lower too.
And worryingly for Sterling, analyst Ken Odeluga at City Index in London says further falls in the share price are likely:
"We expect a harsh winter for Deutsche shares, with a steady continuation of the stock’s long-term decline interspersed with further sharp upsurges of volatility, like today’s. For the time being, we expect the stock to continue to overreact to news which would be regarded as flimsy during ‘normal’ times."
Sentiment was further dented on news that Deutsche's fellow German bank Commerzbank had unveiled plans to cut up to 10000 jobs and suspend dividends for the first time.
The move sent jitters through the finance sector and ensured a strong start to the day for global stocks, commodities and the Pound was reversed.
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GBP/USD forecast for the week of October 3, 2016
The GBP/USD pair had a very flat week as we bounced around just below the 1.30 level but really didn’t go anywhere. Ultimately, I believe that the 1.2850 level below is massive support, so therefore if we can break down below it, we could then go to the 1.25 handle given enough time. A break above the top of the range for the week could be a buying opportunity, but I believe there is more than enough resistance above that sooner or later exhaustion will return, as we are in a massive downtrend.