The pound ended its recovery on Friday, supporting a continued overall bias both technically and fundamentally to the downside
- The pound to euro is trading at 1.1969
- The pound to dollar is trading at 1.3300
- The euro to pound is trading at 0.8354
The pound weakened on Friday after hints from Governor of the Bank of England (BOE) Mark Carney that the BOE was preparing to launch a programme of monetary stimulus in the summer.
Data showing an unexpected rise in manufacturing activity in June, however, failed to support a recovery in the currency as most of the data was gathered before the Brexit watershed on the 23rd.
GBP/EUR – More Downside Forecast
From a chart perspective, further downside continues to threaten the pound-euro complex, with the next target at 1.1850, which is calculated by extrapolating the height of the broadening pattern (a) of the previous correction down.
A break below the 1.1927 lows would probably confirm the extension lower to that target.
GBP/USD – Targeting 1.3000 and then 1.28-27
The cable has broken down below a descending channel, accelerating the medium term down-term.
The channel breakout has an initial target at 1.3000 which is likely to stall downside momentum as it is a major round-number, with counter-trend traders waiting to ambush.
The minimum target calculated using the channel breakout, however, is at 1.2700, generated by extrapolating the height of the channel by a 100% lower.
A break below 1.3118 would probably lead to a move down to 1.3000, and a decisive move below 1.3000 – perhaps confirmed by a break below 1.2950, would probably open the way to 1.2700.
There is a possibility this may be an exhaustion move, however, it is still too early to say yet.