GBP/USD Nears Critical Support Levels – Guest Analysis

Dan Blystone

Dan Blystone of Scandinavian Capital Markets looks at the GBP/USD pair during these turbulent economic times.

By Dan Blystone, Senior Market Analyst, Scandinavian Capital MarketsWith 22 years of experience, Dan gained insight to the markets working at Altea Trading, ABN AMRO and Infinity Futures in Chicago. He is the founder of TradersLog and the Chicago Traders Group. Find out more about Dan by clicking here.

Cable fell to fresh 5-month lows in Monday trading. The pair bounced early in the session, following the Federal Reserve’s emergency decision on Sunday to slash interest rates to near zero. Last week, GBP/USD experienced a devastating series of losing days while global equity markets crashed and investors sought shelter in the greenback, the world’s most liquid currency.  

Last Wednesday, the Bank of England (BOE) cut the base rate from 0.75% to 0.25% to address the economic fallout of the coronavirus pandemic. Speculation is rising that the new BOE governor Andrew Bailey will act swiftly to cut interest rates to a record low of 0.01% to protect jobs and growth. Rate cuts typically pressure a currency, due to the fact that that the lower yield makes them less appealing to investors.

On Sunday, the Federal Reserve announced an interest rate cut of 100 basis points to 0.0-0.25% and the launch of a massive $700 billion quantitative easing program. During a press conference, Fed chair Jerome Powell stated: “We will maintain the rate at this level until we’re confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals.”

Despite this news, S&P 500 futures hit their limit down minutes after the open of markets in Asia. The dollar, which would normally be weakened by dovish Fed policy, may remain underpinned by its liquidity and its status as the world’s reserve currency. 

Meanwhile the pound fell to a fresh six month low against the euro on Monday, entering a sixth day of losses. Price fell below the key psychological level of 1.10 in early Monday trading, emboldening the bears.

Looking at the GBP/USD daily chart we can see that price has fallen well below the ‘line in the sand’ 200-period moving average, where the bears hold the technical advantage. Potential support lies at the prior lows of 1.2199. A drop below the October 2016 low of 1.1903 would mark multi-decade lows.

The subject matter and the content of this article are solely the views of the author. FinanceFeeds does not bear any legal responsibility for the content of this article and they do not reflect the viewpoint of FinanceFeeds or its editorial staff.

 

Read this next

Market News, Tech and Fundamental, Technical Analysis

EURCHF Technical Analysis Report 24 April, 2024

EURCHF currency pair can be expected to rise further toward the next major resistance level 0.9840, which stopped the pervious waves C and B, as can be seen below.

Digital Assets

Monex Group expands crypto business with 3iQ takeover

Monex Group has completed the acquisition of a majority stake in 3iQ Digital Holdings, Inc., a Canadian digital asset investment fund manager, as part of its strategy to expand its crypto business.

Education, Fintech, Inside View

How to Get Into Fintech: Best Tips to Succeed

The Fintech sector is experiencing significant growth, with fresh opportunities emerging rapidly.  Innovations such as machine learning and cryptocurrency are revolutionising finance, leading to a need for trained experts.

Digital Assets

FalconX launches Prime Connect on Deribit

“We are pleased to launch Prime Connect with Deribit and look forward to providing our full suite of prime services which allow institutions to confidently scale their digital assets portfolios while trading on exchanges.”

Retail FX

Lion launches multi-currency trading accounts powered by AI

The core advantages of multi-currency trading account services include enabling significant cost savings and higher efficiency for investors.

Inside View, Interviews

Interview: Stanislav Bunimovich on Finalto’s white label solution

To explore what makes Finalto’s white-label solutions stand out in such an incredibly competitive market, Finalto sat down with its Chief Operating Officer, Stanislav Bunimovich, for an interview. 

Digital Assets

Talos acquired Cloudwall for a better portfolio management system

Cloudwall’s additional expertise in portfolio risk systems further positions Talos at the forefront of portfolio management systems across spot, futures, perps, and options.

Digital Assets

Bybit’s Bitcoin market share explodes, up by 400%

“This milestone is a testament to our sharp trading products and the loyalty of our users. As the industry evolves, Bybit remains at the forefront, ready to set new standards in the crypto trading world.”

Crypto Insider

Why Self-Custody is the Key to Secure Crypto Trading

Crypto trading is fast gaining popularity; as of writing, the total market capitalization stands at $2.3 trillion, double what it was at the onset of the 2021 bull market.

<