Down with the Pound
January 28, 2010
Over the past few trading days, the British pound has been confined to a very tight trading range. The following chart illustrates the predicament that GBP/USD traders find themselves in right now and I believe that the breakout will be to downside with the GBP/USD testing 1.60 in the near term.
This morning, Standard & Poor’s announced that “We no longer classify the United Kingdom (AAA/Negative/A-1+) among the most stable and low-risk banking systems globally” and I have to say that this is HUGE. S&P had already lowered the U.K.’s place in its Banking Industry Country Risk Assessment gauge to Group 3 from Group 2 on Dec. 21. The risk of investing in the U.K. is now on par with the risk of investing in countries like Portugal, Saudi Arabia, Ireland, Chile and Austria. You can imagine what this means to investors looking for a place to put their money.
On top of that, the outlook for consumer spending is quite dismal. In my daily report yesterday for FX360.com, I talked about how the CBI retail sales index fell by the largest amount since August 2009 which suggests that U.K. consumers cut back spending after the holiday shopping season. There is a very good chance that this weakness will feed into the retail sales report and therefore we remain skeptical of the rally in the GBP/USD and believe that the odds are skewed towards a move down to 1.60. The latest announcement only strengthens this call.
Here’s a daily chart of the GBP/USD.
Source: eSignal
Posted in 2009 gbpusd forecast, British Pound, S&P, forex blog
content rss
January 28th, 2010 at 10:11 pm
If GBP/USD will go lower, it won’t be because of consumer spending or S&P, but because USD and JPY are currently the stronest currencies around, while exotics, NZD, EUR are at the other end of the scale. GBP is doing quite well (general election ahead), it was the strongest currency on Monday. There is no technical signal yet on the charts that of reversing, so these tendencies should continue.
January 29th, 2010 at 10:58 am
That certainly will contribute to it but the S&P stuff and the grim outlook is why the GBP/USD has fallen the most on a percentage basis today
January 29th, 2010 at 6:01 pm
[...] Kathy Lien sees the tight range trading in the Pound and points to the direction of the breakout – down. [...]
January 29th, 2010 at 8:42 pm
[...] Kathy Lien sees the tight range trading in the Pound and points to the direction of the breakout – down. [...]
January 29th, 2010 at 9:38 pm
Anyway, GBP/USD chart begged to be shorted:) I am long term bearish on the pound and will get rid of it by year end.
February 1st, 2010 at 7:10 pm
Taking into consideration the news releases of the nearest future, it can be admitted, tht GBP is likely to continue falling down…
February 2nd, 2010 at 9:37 am
Yep - chart still looks pretty ugly on this one.
February 4th, 2010 at 6:58 pm
rookie trader, just saying thanks for all the great insight on trades you publish
February 5th, 2010 at 7:50 am
Just for the record, the UK’s public debt CDS went over the 100 mark today… It is becoming increasingly difficult to keep a straight face when reading about the S&P’s UK’s AAA rating.
That said, USA’s one went up to 61…
February 8th, 2010 at 6:29 pm
Hi, I’m going to America in April and starting to worry about the GBP/USD rate. Do you think I should buy now or give it some time? I understand this will be hard to predict but any you make will certainly be an improvement on mine. Many Thanks
March 1st, 2010 at 7:16 am
Just for the record:
http://www.ft.com/cms/s/0/f14fb952-249e-11df-8be0-00144feab49a.html?nclick_check=1
“Gilts lose triple A lustre for investors” - the UK’s public debt is no longer trading as AAA….
The article also points that a rating downgrade is unlikely before the elections (which happen to be the 3rd of June)…