FX_IDC:GBPUSD   British Pound / U.S. Dollar
We have seen a breakdown in the channel formed since May here on Cable. We had the chnnel bound structure from May until the beginning of July, shown by the first box, and then we saw a breakdown in this structure, shown by the second box. What is very interesting for me is the lower high we had made at the end of August with a Head and Shoulders pattern having formed. From here, it will be interesting to see whether price retests and bounces off of the May trendline or if we continue up to the point of control for another move downwards.

My view is that if we are looking purely at interest rate divergence and investor expectations, the US are far more likely to hike sooner than the UK. Dollar strength, therefore, will cause a fall in the price of Cable. My opinion is that we are looking at quite a bearish market from here on in with Cable, and with a very calendar heavy day tomorrow, it will be interesting to see the reaction that the market has. If we see a change in the forecasted vote (if the 1 'for' a hike vote is removed), I think we will see a very negative reaction for GBP.

Also, I think we are seeing a heavy return to a risk on sentiment and flows back into the USD, reflected in the bounce in equity markets. Again, this will weigh on sterling.

Form your own opinions.

Not to be taken as investment advice.

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