GBP/USD near-term risks are tipping more obviously lower again - Scotiabank

Sterling’s recent consolidation may be ending, said Shaun Osborne, Strategist at Scotiabank, and added that weakness below support in the low/mid 1.22 area suggests that near-term risks are tipping more obviously lower again.

Key Quotes

“UK government borrowing data for September revealed a larger than expected borrowing requirement in the month (nearly GBP2bn higher than expected at GBP10.1bn). This suggests the government’s borrowing objectives for the year are perhaps at serious risk. Post-data focus is on a meeting between PM May and EU commission president Juncker at the ongoing EU summit where Brexit issues will likely dominate.”

“GBPUSD short-term technicals: negative—Sterling’s recent consolidation may be ending, much as we feared yesterday. We give the technical billing a negative rating today as spot has eased below short-term trend support (1.2235) off the flash crash low on the short-term chart. Weakness below support in the low/mid 1.22 area suggests that near-term risks are tipping more obviously lower again. We see minor support at 1.2200/10 intraday but little else ahead of renewed push under 1.20. Trend strength signals are aligned bearishly on the short, medium and long term charts – implying little scope for sustained, counter-trend corrections.”