The greenback has garnered safe haven flows while sterling is on the back foot with rate hike prospects being pushed back month over month this year. This week will come with the BoE meeting and minutes, and the detail in the minutes will be scrutinised for possible timings of a possible rate hike this year. Oil will also have an effect on the pound as the UK being oil producer, despite the UK being a net energy importer. It might not be a coincidence that
Sterling has shed more than 4.5 cents since the December 28 high near $1.4970 while oil has deteriorated similarly in price. Analysts at Brown Brothers Harriman noted that Sterling took out last year's low, reaching the lowest level since early 2010, just above $1.45.
"That early 2010 low was near $1.4250, and that is the next objective. Sterling posted an outside down session before the weekend, illustrating its inability to sustain even a modest uptick. Technical indicators give little reason to pick a bottom yet."
Oil headed to $30
The analysts added, "Oil prices continue to trade heavily. Technical indicators give little reason to think that a significant low is at hand. Some near-term consolidation is possible, but resistance is seen in the $34.60-$35.35 area. Many observers are to be looking at sub-$30 levels."
Technically, Karen Jones, chief analyst at Commerzbank explained that intraday Elliott counts are suggesting that the down move is exhausted for now but while capped by the accelerated downtrend at 1.4673 we will continue to look for losses to 1.4385 the 30 year support line. Above 1.4673, rallies should struggle 1.4840/1.5000 and while capped here the market will remain offered."
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