GBPUSD Seen Lower as Bank of England Weighs More Easing

The GBPUSD desperately tries to claw back to the 1.30 level. However, after forming a bullish divergence with the RSI lately, it bounced nicely from the lows, somehow easily predicting move.

The 1.30 level proved decisive for cable and likely will remain so as we entered the last quarter of 2020. It is unlikely that the pair will not reach 1.30 again, but that is a good opportunity for bears to re-enter, especially considering the Bank of England’s bearish stance.

Bank of England’s Options

Two days ago, a new round of Brexit negotiations started. Unfortunately, just like the Brexit referendum brought uncertainty that lasted until the voting day, the Brexit negotiations are full of uncertainty.

Bank of England stands ready to act in both cases – deal or no deal. In the case of a deal, Deutsche Bank still sees the Bank of England is still viewed to ease the monetary policy stance by adding another GBP60 billion in December.

On the other hand, in the case of a no-deal, the Bank of England is likely to introduce negative rates in the kingdom. Therefore, the recent rhetoric regarding negative rates should not be taken for granted – it is just a preparatory step in the case of a no-deal Brexit.

One thing is for sure – the U.K. economy, while affected by both the pandemic and the ongoing negotiations, faired pretty well, more than many expected. This is why the pound is not so weak, and on a deal Brexit, the pound has a chance to surge some more.

However, in the meantime, the 1.30 level is likely to offer resistance, especially considering the U.S. elections ahead.

GBPUSD Technical Analysis

A move above 1.30 looks just what courageous bulls want. Bulls may want to sell 1.30 against 1.3175 with a move back to 1.37. More aggressive bulls may want to short at market, using the same invalidation levels and a smaller volume.

Don’t miss a beat! Follow us on Telegram and Twitter.

GBPUSD Price Forecast

More content