10 Jul 2015
GBP/USD Forecast: Rising UK trade deficit could weaken the pound – FXStreet
FXStreet (Barcelona) - FXStreet Editor and Analyst, Omkar Godbole, offers the outlook for GBP/USD into the trade balance data release, expecting a rising deficit to lead to a downside break in the 1.5350-1.5410 range.
Key Quotes
“The UK trade balance figures for May are scheduled for release today. The deficit is seen rising, which could weigh over the British Pound. Moreover, the Bank of England warned earlier this month that “the yawning deficit in the UK's overseas trade and earnings with the rest of the world as a possible risk if it becomes harder to finance. Meanwhile, the final June PMI reports also showed the new export orders are taking a hit due to the strength in the Sterling, especially against the EUR. Consequently, a rising deficit figure is likely to result in a downside breakout from the 60-pip range of 1.5350-1.5410.”
“Apart from the UK data, the pair could be influenced by the Greek related noise and the resulting moves in the EUR/GBP cross.”
Technical – Stuck in 60-pip range
“At the moment, the pair is hovering around 1.54. The pair made another attempt to take out 1.5408 (38.2% Fib R of Apr-Jun rally), but failed. The bullish divergence witnessed on the hourly chart failed to push the pair over and above 1.5408. Consequently, the likelihood of a downside breakout from 1.5350-1.5410 range has increased, especially if the deficit widens as expected. A break below 1.5350 would open doors for a downside target of 1.5290.”
“On the other hand, an hourly close above 1.5408 may see the pair rise to 1.5460 (61.8% Fib of June rally).”
Key Quotes
“The UK trade balance figures for May are scheduled for release today. The deficit is seen rising, which could weigh over the British Pound. Moreover, the Bank of England warned earlier this month that “the yawning deficit in the UK's overseas trade and earnings with the rest of the world as a possible risk if it becomes harder to finance. Meanwhile, the final June PMI reports also showed the new export orders are taking a hit due to the strength in the Sterling, especially against the EUR. Consequently, a rising deficit figure is likely to result in a downside breakout from the 60-pip range of 1.5350-1.5410.”
“Apart from the UK data, the pair could be influenced by the Greek related noise and the resulting moves in the EUR/GBP cross.”
Technical – Stuck in 60-pip range
“At the moment, the pair is hovering around 1.54. The pair made another attempt to take out 1.5408 (38.2% Fib R of Apr-Jun rally), but failed. The bullish divergence witnessed on the hourly chart failed to push the pair over and above 1.5408. Consequently, the likelihood of a downside breakout from 1.5350-1.5410 range has increased, especially if the deficit widens as expected. A break below 1.5350 would open doors for a downside target of 1.5290.”
“On the other hand, an hourly close above 1.5408 may see the pair rise to 1.5460 (61.8% Fib of June rally).”