Pound / Dollar Outlook: GBPUSD Rejected at 1.5674 Again
Latest projections concerning the pound v US dollar confirm further gains can be expected despite Thursday's slump.
The pound sterling was seen once again testing its best levels of July following recent climbs towards the 1.5661 exchange rate on the spot markets.
The move higher is an extension of the move from lows seen below 1.54, registered in early July.
However, the pound to dollar exchange rate has since decline on news that UK retail sales fell 0.2% in the month of June - markets had expected sales to rise 0.3%.
The economic release has set sterling back across the board but it is interesting to note that losses are most shallow against the dollar.
Studies of the charts confirm momentum is positively aligned behind sterling with the Relative Strength Index comfortably in bullish territory at 58 confirming markets have latent potential to push the GBPUSD higher.
We have also seen the rate break above the 20 and 50 day moving average over the course of the past 48 hours - a further sign to currency traders that the trend higher is growing in strength.
That is our verdict, but what do the big institutional names think?
Note: All quotes in this piece refer to the spot markets. Your bank will affix a discretionary spread when delivering FX. Specialists will however get you closer to the market, in some instances delivering up to 5% more currency.
We ask a number of leading analysts where they see the pound headed next against the dollar.
Karen Jones at Commerzbank Says the GBPUSD Has More Work to Do
"GBP/USD attempted another run up to the 1.5674 recent high that was again met with rejection, this was an outside day to the downside.
"We have now seen 3 rejections in this vicinity, and our negative bias remains entrenched and we look for rallies to remain capped by 1.5700 and trigger a slide towards support at 1.5171, the June low and favour losses beyond here. Initial target is the 200 day ma at 1.5407 and 1.5332 the July low.
"Above 1.5700 will force us to neutralise our outlook and allow for another punch up towards 1.5813 and 1.5930, the highs that we saw in May and June. If seen, we look for these to again hold."
Emmanuel Ng at OCBC Bank Sees Support at 1.54
"After being spanked by the weaker than expected UK June retail sales numbers, GBP-USD has perforated the 55-day MA (1.5562). If 1.5500 is perforated with any momentum, look towards the 200-day MA (1.5408) if the support from the BOE’s recent rhetoric continues to wane."
Jeremy Stretch at CIBC looks through recent noise and is fundamentally bullish
"While we have seen a bounce in the short Sterling strip and pullback in GBP valuations we would use the reversal to get into Sterling at better levels. We would not expect retail sales to impact BoE rate expectations materially.
"Indeed the prospect of robust Q2/3 growth assumptions, using up precious spare capacity, suggests we would not be surprised should at least three MPC members vote for tightening next month."
