Technical Analyst, Saxo Bank
Summary: The bearish scenario for Sterling outlined in previous Technical Update seems more and more likely to play out. https://www.home.saxo/content/articles/forex/technical-analysis-gbpusd-eurgbp-03022023
GBPUSD could soon test key support at 1.1840. EURGBP likely to break back above 0.89 aiming for higher levels.
Today's Saxo Market Call podcast.
Today's Market Quick Take from the Saxo Strategy Team
GBPUSD failed yesterday to close back above 55 Moving Average. That is the second time after breaking the lower rising trendline and below the 55 SMA.
GBPUSD seems set to test key support at around 1.1840. 100 and 200 daily SMA’s will provide some support here. A close below 1.1840 will confirm a Double Top pattern unfolding with downside potential to around 1.1145 support illustrated by the two vertical arrows.
RSI is bearish testing its rising trendline. A break below followed by a move below 40 threshold will support the very bearish GBPUSD scenario.
For GBPUSD to demolish the bearish picture a close above 1.2445 is needed.
EURGBP ran out of steam just a few cents below resistance at around 0.8990. However, EURGBP seems to resuming uptrend. A break back above 0.8900 will confirm that.
If that scenario plays out EURGBP is likely to have the power to break the 0.8990 moving to next resistance at around 0.9066.
Key support at 0.8720 which is likely to be tested if EURGBP closes below 0.8800.
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.