GBP/USD forecast - page 25
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GBP/USD Outlook: Further Strength Ahead of a Capitulation
The Pound's relief rally against the US Dollar should be viewed as a near-term event argue a number of analysts who give us the targets that are feasible ahead of the next major move lower.
The outlook for GBP/USD has turned bullish this week and the pair has enjoyed its strongest run since early September.
At the time of writing the pair is at 1.2234 and Ipek Ozkardeskaya at London Capital Group is looking for a successful attempt above the 1.2295/1.2325 resistance area to pave the way towards 1.2440.
This would represent a half-way recovery of the decline from the September 29th high to October 7th flash-crash.
Also eyeing further strength is Richard Perry at Hantec Markets. However, Perry cautions that strength should remain limited:
“With the selling pressure having abated for now, Cable has turned into a range play.
“The hourly chart shows that the trend lower has been broken and a move above $1.2270 resistance yesterday improved the outlook.”
According to Perry the bulls will now be eying the resistance at $1.2330 which held yesterday and forms the neckline of a near term base pattern.
A decisive break would imply around 200 pips of further recovery.
“I have been looking at the role the 55 hour moving average (c. $1.2227) has played in recent weeks and this has become a key gauge for the hourly chart, so watch this as a basis of support now,” says Perry.
Another 5-6% Downside for British Pound v Euro, Dollar Forecast by Credit Suisse After Consulting their Brexit Dial
Credit Suisse have given six reasons to justify their view that Pound Sterling still has further to fall but they do acknowledge significant upside risks to this view.
Projecting the final destination to GBP’s long journey south could be a as simple as moving the dial along a hard-versus-soft Brexit scale.
Where the dial points once the Brexit fog lifts would therefore give you the final resting place of GBP/EUR and GBP/USD.
The trick is therefore figuring out where to put the numbers on the scale and then calculating the hard-versus-soft Brexit probabilities and moving the dial accordingly.
Of course calibrating these probabilities is the complicated bit.
But, analysts Shahab Jalinoos and Bhaveer Shah at Credit Suisse have done the maths and they currently see a 60:40 probability of hard vs soft Brexit based on the current political picture.
The dial turned a little further towards soft-Brexit on Wednesday the 19th October when Chancellor Hammond appeared before the Treasury Select Committee and told lawmakers that the government was looking at various market-friendly options over European Union immigration.
If the dial were to keep turning to full soft-Brexit then Jalinoos and Shah estimate that Sterling will recover to 1.35 against the Dollar on a one-year horizon.
Were the dial to swing back sharply to a full hard-Brexit then the Pound could actually fall all the way back down to 1.05 - the all time low - against the US Dollar.
Noting that neither outcomes are likely the two Credit Suisse analysts are left with a weighted-probability forecast of 1.17 against the US Dollar.
This is their new one-year forecast.
This would leave EUR/GBP around 0.90 - from a Pound into Euro perspective this translates as 1.110.
However, “on a 3-month horizon, we remain bearish Sterling and forecast GBPUSD at 1.16 and EURGBP at 0.95,” say Jalinoos and Shah.
EUR/GBP at 0.95 equates to 1.0526 in GBP/EUR.
The previous three-month forecast for GBP/EUR was at 1.110 which suggests a 6% cut while the equivalent for GBP/USD was at 1.22 suggesting a 5% cut.
“As long as the prospect of Article 50 being triggered by March is alive amid UK political ruptures, we feel the natural gravity will probably be towards a lower GBP, despite some signs of stretched positioning,” say the two analysts.
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GBP/USD to Rebound to 1.2650 on Rumours of 'Brexit Lite'
Strategists at Morgan Stanley are arguing that the pound will probably rally from its current rock-bottom lows to 1.2650 due to the government reconsidering its “Hard Brexit” stance.
Reports the Prime Minister Theresa May has assured the head of a large foreign car manufacturer that their export competitiveness would not be hit by Brexit has led to speculation the government may pursue a softer line in Brexit negotiations, which is forecast to lead to a rebound in the pound.
“The FT reports that the UK may be prepared to keep paying billions to maintain single market access for the City, and reported over the weekend that a foreign car producer in the UK was assured by Mrs. May that its export competitiveness would not be hit by the result of Brexit negotiations,” said the note from Morgan Stanley.
The currency has further been supported by comments from Bank of England’s (BOE’s) Mark Carney that the BOE will take into account the weak pound at its future monetary policy meetings.
This infers the BOE will not want to overly weaken the pound which might start a ‘run on the currency’ or lead to hyperinflation for foreign consumer goods.
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GBP/USD:
Key levels to watch for:Support: 1.2079; 1.1619;