GBP/USD technical perspective remains negative - Scotiabank

Shaun Osborne, Strategist at Scotiabank, noted that the undertone on GBP/USD remains technically negative and they still rather think the main directional risk of the GBP in the medium-term is to the downside.

Key Quotes

“The UK trade deficit narrowed in July, but not by as much as expected ( -4.5bn versus -4.2bn expected and - 5.1bn in June) while July UK construction output was flat in the month (versus street calls for a 0.5% drop and a – revised - -1.0% fall in June). The BoE reported that inflation expectations had nudged a little higher in the next 12 months in its latest survey (unsurprising, given GBP depreciation).”

“UK data are producing the best run of positive surprises since 2013 and while data may add to concerns about “fear mongering” ahead of Brexit, we still rather think there is perhaps another, large, shoe to drop in this respect in the months ahead. Sterling is out-performing on the day but gains are not off-setting heavy losses from earlier in the week.”

“GBPUSD short-term technicals: bearish—Despite a strong start to the week, the pound struggled to push on through the mid-1.34 area, much as expected, and price signals turned negative with yesterday’s slide. The undertone remains technically negative this morning, despite intraday gains, and we still rather think the main directional risk of the GBP in the medium-term is to the downside. Minor gains are running into good selling interest in the low 1.33 area and we look for losses to extend on a break under support at 1.3280 intraday. A low close on the week will add to the negative undertone.”