Foreign exchange analysts at Credit Suisse maintain a bearish stance on Sterling and considers that the recent Pound to Dollar (GBP/USD) exchange rate recovery from 2-year lows just below 1.2000 is corrective.
According to the bank; “Resistance at 1.2323/43 now ideally caps for an eventual sustained move below 1.2017, for a fall to 1.1500/1.1409.”
Near-Term Relief for Under-Siege Pound
GBP/USD hit 2-year lows just below 1.2000 against the dollar on June 14th before staging a limited recovery to trade around 1.2250 on June 22nd.
Credit Suisse sees scope for only a limited further near-term relief from over-sold conditions; “The sharp rebound in GBPUSD looks to be stalling as suspected and with a top in place in trade weighted terms, we continue to view recent strength as a corrective rebound.”
It expects near-term resistance at 1.2323/43, although the bearish overall view will remain valid as long as rallies are capped around 1.2430.
According to Scotiabank; “The GBP is still holding relatively close to the 1.23 area and is likely to make another push above it while it holds a bullish trend from its mid-May lows.” It expects resistance around 1.2350.
JP Morgan takes a similar view to Credit Suisse. As far as the short-term outlook is concerned it notes; “the recent price action is showing tentative signs of similar deceleration on the weekly charts, where the new low is not being confirmed by momentum indicators. That setup, coupled with stretched sentiment conditions, points to a period of mean-reversion to develop from support.”
Longer-Term Focus on March 2020 Lows
Credit Suisse remains bearish on the longer-term outlook and expects renewed losses once the corrective rebound has been completed; “This should then clear the way for further weakness to support next at 1.1861/57 and eventually 1.1500/1.1409, which is the bottom of the 6 -year range and potential long-term trend support stretching back to 1985.”
It expects a strong base to form at these levels.
JP Morgan is also bearish on the longer-term outlook. It considers that the rapid slide through 1.30 caused serious damage and an important underlying indicator of direction; “we view the 1.2973-1.30 Apr 13 low/Apr 22 breakdown and reacceleration of the bear trend to mark a key longer-term chart inflection.”
BBH is another bank bearish on the long-term outlook; “we continue to target the March 2020 low near 1.1410.”
Credit Suisse also expresses its bearish Sterling view through the Euro to Pound (EUR/GBP) exchange rate.
According to the bank; “we remain of the view that recent weakness has been a corrective.”
It expects support in the 0.8520 area with strong longer-term gains; “We maintain our bullish outlook for strength back to .8722 and eventually .8861/66.”
Read More: Pound To Dollar Recovery Corrective, Threat Of Long-Term Slide To 1.1500