GBP/USD in oversold condition could be a buy opportunity
The USDollar has been extremely overbought and overvalued, in fact, EUR/USD and GBP/USD have experienced very large sigma depreciation in the exchange rate.
At this point, the USDollar has become quite overvalued and overbought, considering that the American economy requires capital inflows necessary to finance the Federal Fiscal deficit, public spending, and Balance of Trade Deficit, which are both huge deficits north of +$1.0 trillion dollars every fiscal year. Thereby, the USDollar overvaluation and exchange rate mispricing could become a negative effect on multinational revenues adjusted for the exchange rate depreciation of the local currency, but most importantly overvalued USDollar constraints financial flows in the global economy, thereby consequences are going to be foreign creditors being much less willing to give credit to the United States either by buying Treasuries and TBills either by financing the Balance of Trade Deficit, with an overvalued Dollar these financial flows have become much more difficult.
Going forward the stock market should see outflows from the equity market and from the USDollar also correlated to the most illiquid parts of Dollar credit markets.
Other G10 currencies should benefit from the unwinding of the USDollar trade, this will take some time for the fx market to adjust to the idea that the USDollar deficits need to be financed and an overvalued dollar would make financial flows difficult. Thereby, a switch in market dynamics correlations should see Stocks and the USDollar selling off at the same time.
In the near term, the GBP/USD chart on a weekly timescale also describes how depreciated has become Sterling against the USDollar, this depreciation will have to be stopped at some point, either by a change of positioning in the FX market among the largest institutional. money market investors, hedge funds etc.., also by a monetary policy stance at the Bank of England that would be supportive of Sterling in the exchange rate, although Central Banks usually don't engage in exchange rate targeting.
For the GBP/USD chart oscillators as the MACD and the RSI already define a very oversold GBP, that has been bottoming at very low and undervalued exchange rate levels, however, going forward the British Pound could be a currency to hold with rising interest rates and positive carry on the Pound.
In the near term, the GBP/USD fx pair in oversold levels we could see buyers entering long Pound positions at very oversold cheap levels against an extremely overvalued USD.
The upside potential for the British Pound could be GBP/USD 1.25
At this point, the USDollar has become quite overvalued and overbought, considering that the American economy requires capital inflows necessary to finance the Federal Fiscal deficit, public spending, and Balance of Trade Deficit, which are both huge deficits north of +$1.0 trillion dollars every fiscal year. Thereby, the USDollar overvaluation and exchange rate mispricing could become a negative effect on multinational revenues adjusted for the exchange rate depreciation of the local currency, but most importantly overvalued USDollar constraints financial flows in the global economy, thereby consequences are going to be foreign creditors being much less willing to give credit to the United States either by buying Treasuries and TBills either by financing the Balance of Trade Deficit, with an overvalued Dollar these financial flows have become much more difficult.
Going forward the stock market should see outflows from the equity market and from the USDollar also correlated to the most illiquid parts of Dollar credit markets.
Other G10 currencies should benefit from the unwinding of the USDollar trade, this will take some time for the fx market to adjust to the idea that the USDollar deficits need to be financed and an overvalued dollar would make financial flows difficult. Thereby, a switch in market dynamics correlations should see Stocks and the USDollar selling off at the same time.
In the near term, the GBP/USD chart on a weekly timescale also describes how depreciated has become Sterling against the USDollar, this depreciation will have to be stopped at some point, either by a change of positioning in the FX market among the largest institutional. money market investors, hedge funds etc.., also by a monetary policy stance at the Bank of England that would be supportive of Sterling in the exchange rate, although Central Banks usually don't engage in exchange rate targeting.
For the GBP/USD chart oscillators as the MACD and the RSI already define a very oversold GBP, that has been bottoming at very low and undervalued exchange rate levels, however, going forward the British Pound could be a currency to hold with rising interest rates and positive carry on the Pound.
In the near term, the GBP/USD fx pair in oversold levels we could see buyers entering long Pound positions at very oversold cheap levels against an extremely overvalued USD.
The upside potential for the British Pound could be GBP/USD 1.25