A strange series of events recently sent the United Kingdom’s Pound Sterling tumbling to historic lows. Just weeks after the death of Queen Elizabeth II (a head of state who was uniquely well-liked among the UK’s population by contemporary standards) Kwasi Kwarteng, Britain’s new chancellor in recently appointed Prime Minister Liz Truss’ administration, issued a fiscal statement on the 23rd of September. Paramount for this economic agenda are subsidies to provide price caps for devastating energy costs, along with an array of tax cuts, especially for high income earners. The plan, which would require extensive debt financing to execute (over 1.5% of GDP per year for the tax cuts), prompted GBP/USD to plummet past 1985's lows, briefly falling below 1.04 for the first time in history. This historic peril for the Pound has since been stabilized via emergency bond-buying intervention from the Bank of England (BoE).
Is GBP/USD Parity Possible?
Some analysts appear to be speculating that the Pound will fall to parity with the US Dollar, which does reflect overall institutional sentiment as per the latest COT data. Judging from the aforementioned recent developments in fundamentals, e.g., a UK government aiming for fiscal stimulus through deficit spending and a BoE that is startlingly willing to provide dovish monetary stimulus, the Pound is primed for further weakness. These efforts to restore growth to the UK’s economy while inflation hovers at 40-year highs seem comparable to fighting a fire with gasoline; thus, a continued poor performance from the Pound is plausible. EdgeFinder analysis appears to corroborate these biases, as shown in these two pairs with their respective signals and ratings.
1) GBP/USD (Receives a -6, or ‘Strong Sell’ Signal)
After finding concomitant support between the bottom trendline and 1985's previous record low, price action has rallied. Selling pressure could resume upon touching resistance from the upper trendline, moving average(s), or Keltner Channel walls.
2) GBP/JPY (Receives a -5, or ‘Sell’ Signal)
Similarly to GBP/USD, after briefly touching support around the 149 level, price action is currently retesting the upper zone as resistance.
Save time looking for setups with the EdgeFinder's watchlist! In a glance, see the EdgeFinder's current top buys and top sells.
As of 9:10 am EST, the 10-Year bond rate is up ~3.50% while the dollar index remains flat. Some big news coming up in the next 24 hours for the USD, EUR and AUD. US consumer confidence is expected to fall from the last reading. We received a strange signal from the EdgeFinder that could […]
This week, we have seen a lot of market swings in sentiment along with uncertainty around economic stability. Because of this mixed mindset, investors have been shifting their interest towards gold. This article will cover why gold could continue to move higher. Medium to high impact news is coming up for all currencies such as […]
There are some major news ahead for the EUR, CAD, AUD and USD pairs this week. Wednesday will be another Fed rate decision forecasted to be another 25 bp. Here are some events set to come out tomorrow: EdgeFinder Analysis UC is still the EdgeFinder's favorite buy score along with USDZAR at +7. Retail is […]
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here