GBP/USD limited upside scope and more downside pressure  - Scotiabank

Shaun Osborne, Chief FX Strategist at Scotiabank notes that they are negative on GBP as the bearish alignment of trend strength oscillators across a range of short, medium and longerterm time frames implies limited upside scope and more downside pressure for the GBP going forward.

Key Quotes

“Sterling started the session well enough but the release of the UK CBI’s latest manufacturing confidence data suggest Brexit has been a massively negative blow to businesses and weighed on the pound. The business optimism component of the CBI’s survey dropped to -47 in the latest quarter, from -5 in April. This was the lowest reading in the survey since 2009 when the UK economy was in the midst of a prolonged recession. The UK reports Q2 GDP Wednesday but this data will not capture much Brexit impact. House prices and the GFk consumer confidence data (due Thursday and Friday respectively) may be more influential for the GBP in the short run.”

“GBPUSD short-term technicals: bearish—Cable consolidated some of last week’s drop from 1.3285 but the minor rebound has stalled at the 38.2% retracement of the 1.33/1.31 decline and price looks to be forming a minor bear flag intraday (resistance at 1.3160, bearish below 1.3107); a break lower should put Cable on track for a push to the low 1.29 area in fairly quick order. More broadly, we are negative on the GBP. The bearish alignment of trend strength oscillators across a range of short, medium and longerterm time frames implies limited upside scope and more downside pressure for the GBP going forward.”