Article by ForexTime
It was previously mentioned that investor attraction towards the Cable was weak, with the pair’s strongest chances of reversing to the upside resting with USD profit-taking, and this is exactly from transpired last week. The pair rallied from 1.5641 and even made a brief visit towards 1.58 (1.5824) before consolidating around 1.5770. Anxiety among investors ahead of UK Prime Minister David Cameron’s speech to outline proposals for tougher EU reforms for migrant benefits sent the pair all the way back down to the low 1.57s, mainly due to fears that if the EU does not agree to these proposals, the UK might become one step closer to leaving the EU.
The week ahead is likely to be more of the same for the Cable, with the pair’s highest chances of progressing to the upside being reliant on USD profit-taking inspiring risk appetite into the currency markets. The upcoming PMIs from the UK are expected to remain strong, but with bets for an interest rate rise continuing to be pushed back, Sterling bulls may find it difficult to charge forward. There are no expectations for the Bank of England (BoE) to change monetary policy this Thursday. There have been talks regarding one of the Monetary Policy Committee (MPC) dissenters switching votes, but judging by previous comments from members Mr Weale and Mr McCafferty, that’s not expected either.
The major downside risk for the Sterling/Dollar this week is Wednesday’s Autumn Statement, and judging by the pair commencing the week by already recording a new yearly low at 1.5586, I think investors are arriving early to price in a downbeat statement. David Cameron attracted vast media attention when he commented after the G-20 Summit in Brisbane that the world economy could be set to enter another recession, with the “red warning lights already on the dashboard” and this suggests to me that investors may be uninspired with what they hear on Wednesday.
In reference to the technicals on the Daily timeframe, the GBPUSD is currently on the edge of falling below its wedge pattern. If the early morning downside pressure continues throughout the upcoming week, support can be found at 1.5586, 1.5520 and 1.5450.
Written by Jameel Ahmad, Chief Market Analyst at FXTM.
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