FX Monthly (Aug ’16)
The anticipated minor corrective GBP/USD bounce is finding difficulty reaching the 1.3500 barrier, as weekly studies turn mixed.
Consolidation is expected to give way to fresh downside tests, as monthly studies continue to weaken and background studies also track lower. A close below the 1.2790/00 low of July will confirm extension of the July 2014 bear trend, with focus then turning to the 1.2565 low of June 1985 as sentiment deteriorates further. Just beneath here are congestion around 1.2500 and further congestion around 1.2400, (last traded in 1984/1985).
An unexpected close above 1.3500 will help to improve post-Brexit bearish sentiment, but a clear break above the 1.3830 low of February is needed to turn sentiment neutral once again. This, however, is not looked for, as investors maintain a sell-into-strength strategy.
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