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Sterling (GBP) Collapses Through Support - GBP/USD, EUR/GBP and GBP/AUD Outlooks

Sterling (GBP) Collapses Through Support - GBP/USD, EUR/GBP and GBP/AUD Outlooks

2020-06-20 16:00:00
Nick Cawley, Strategist
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British Pound (GBP) – GBP/USD, EUR/GBP and GBP/AUD Forecast, Chart and Analysis:

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Sterling (GBP) – Technically Weak And Needs Support to Avert Further Losses

The British Pound traded through a range of technical support levels on Friday after the UK revealed that it had borrowed in excess of GBP55 billion in May, nine times more than in May 2019. The UK’s debt-to-GDP ration rose above 100% to its highest level since 1963, as the government splashed the cash in an effort to re-start the UK economy. The sell-off, started yesterday after the BoE meeting, accelerated mid-morning and Sterling broke through a range of closely watched support levels. Today’s close and Monday’s open will decide the British Pound’s near-term fate.

GBP/USD has taken out a few technically supportive indicators this week after failing to break through the 200-dma last week. On Thursday the 20-dma and 61.8% Fib retracement both fell and today GBP/USD broke through the 50-dma, leaving the 50% Fib at 1.2306 the next downside target. To confirm further bearishness the pair need to open below the 50-dma on Monday. The previously mentioned 61.8% Fib at 1.2517 is now the first level of resistance.

GBP/USD Daily Price Chart (December 2019 - June 19, 2020)

GBPUSD Price chart
GBP/USD BULLISH
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Change in Longs Shorts OI
Daily -1% 8% 4%
Weekly -17% 55% 11%
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EUR/GBP used the 20-dma yesterday to move sharply higher and this momentum continued today, taking the pair through the 38.2% Fib at 0.9035 and the May 29 multi-month high at 0.9054. The CCI indicator suggests that the pair are now overbought but not at the extreme levels seen in mid-May. A close and open above the prior high would suggest a further move towards 0.9150 and the 23.6% Fib level at 0.9213. EUR/GBP traders should bear in mind that EU/UK trade talks are ongoing and any news may add extra volatility into the pair.

EUR/GBP Daily Price Chart (December 2019 – June 19, 2020)

EURGBP Price chart

GBP/AUD is another pair I have been following closely, especially the triple-bottom made at the beginning of June. This support has now folded and the move lower needs to be confirmed by an open below here. The downside move was given further credibility this week with the pair unable to close above the descending 20-day moving average, the last of the three moving averages to fall. GBP/AUD now trades at its lowest level since September 2019. The GBP/AUD rally started off the July30 low at 1.7554 and there are a handful of swing lows that need to be broken before this level comes under threat. Prior short-term support at 1.8050 is the likely first level of resistance. A big fall from grace – nearly 30 big figures since mid-March - for Sterling against the Australian dollar.

GBP/AUD Daily Price Chart (June 2019 – June 19,2020)

GBPAUD Daily price chart

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on Sterling (GBP) – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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