Review and dynamics
Most economists believe that the Pound can continue to decline.
Upward correction in the Pound can be terminated by today’s interest rate decision by the Bank of England. It is expected that the rate will be lowered by 25 basis points to the level of 0.25%. In this case, the decline in the Pound and in the pair GBP/USD will continue. If the Bank of England decides to leave the interest rate unchanged, the pair GBP/USD will go up to 1.3430 and continue to rise.
On the results of the UK referendum and the decision to leave the EU the pair GBP / USD has lost 13% from the level of 1.5000. Price is 600 points below the 15-year-lows, which roughly corresponds to level, which the pair reached 31-year ago.
Despite ongoing correction, the decline in the pair GBP/USD can resume, as the bearish sentiments are strong in the market. In case of the reduction in the interest rate, the price of the Pound will go down, which will lower investment attractiveness of the Pound. The pair GBP/USD is also affected by the difference in the monetary policies of the bank of England and the US Fed, which makes the increase in the interest rate by the Bank of England impossible in the long-term.
After significant decline caused by the outcome of the UK referendum, since the end of June descending channel has been formed on 4-hour chart with the lower limit at the level of 1.2600 and the upper limit at 1.3300. Although technical indicators on the daily and 4-hour charts suggest to open long positions, fundamental background gives ground for the decline in the pair.
If the Bank of England does not reduce interest rate, after breaking up the level of 1.3430, the pair can go down to 1.3650 (lows of 2009 and 2001) and 1.3860.
Support levels: 1.3120, 1.3020, 1.2900, 1.2800, 1.2700 and 1.2600.
Resistance levels: 1.3230, 1.3430, 1.3500, 1.3600, 1.3670, 1.3700, 1.3800 and 1.3860.
Sell on the market. Stop-Loss: 1.3280. Take-Profit: 1.3120, 1.3020, 1.2900, 1.2800, 1.2700 and 1.2600.
Buy Stop: 1.3290. Stop-Loss: 1.3230. Take-Profit: 1.3430, 1.3500, 1.3600, 1.3670, 1.3700, 1.3800 and 1.3860.
In the descending channel
Indicators give signals for long positions