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GBP weak and falling – Scotiabank

FXStreet (Barcelona) - Camilla Sutton, CFA, CMT, Chief FX Strategist at Scotiabank notes GBP falling to fresh one‐year lows and through support at 1.5700 due to strong flows and anticipates it to test 1.5781 level.

Key Quotes

“The release of a weaker than expected construction output, up just 1.8%m/m was disappointing, but GBP had already traded to the lows leading into the release; suggesting the downward pressure on GBP is from strong flows. The pushing out of BoE interest rate hikes and mixed data have proven the largest weights on GBP.”

“Next week’s focus will be the BoE minutes and inflation data, expected to come in at a modest 1.2%y/y on headline and 1.6%y/y on core. The risk is a dovish set of minutes and low inflation force GBP to trend lower still.”

“GBPUSD short‐term technicals bearish—with most studies warning of further downside risk and the RSI, at 29, not yet oversold.”

“The downward trend is strong and supported by both side of GBPUSD (a weakened outlook for GBP and a strong outlook for the broad USD). The MACD has to date failed to reach a new low in tandem with spot; however unlike EUR it has shifted lower.”

“We are biased to be short GBP, looking for a test down to 1.5429 (the August 2013 low), with a stop at 1.5781 (the recent high).”

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