GBP hit by Fear

GBPUSD broke down from 1.3750 to test key support at 1.3670. http://www.eightdragonscapital.com

Growth concerns are weighing on the markets. The cause of this concern is the rise in covid 19 delta cases in several G10 countries, despite high vaccination rates.
The US dollar and Japanese Yen have surged on safe-haven demand.
The GBP has been heavily sold, against its peers.

Yesterday, the UK celebrated freedom with the removal of all covid restrictions. However, covid delta cases have spiked, although deaths are thankfully low.
It seems living with covid in the population may be more difficult than the UK Government expected. The World is watching closely to see if high vaccination rates will continue to support the UK economy, and prevent more lockdowns in the future.

Has the UK and Global growth peaked? or is the market overreacting? I prefer to think it is an overreaction.
In overreaction, we can find volatility and opportunity.
This oversold scenario could prove a chance to buy GBP at some very favourable levels.
This morning the GBP still looks vulnerable, however, I am looking for some signs of stability and a GBP recovery.

GBPJPY

The GBP found some support at 149.50/30 and although oversold it is not clear whether we have found the bottom of the market yet.

However, I would be encouraged if 150.00 can be retaken this morning. There is some resistance at 150.10/20 now and should we be able to break up more sellers will be found at 150.70/80.

EURGBP

Remarkably the EUR held up well, despite all the USD buying yesterday and finished the day little changed against the greenback. However, the EUR made some decent gains against the GBP.

With the EUR set on a path of easy monetary policy from the ECB and never ending stimulus it seems unlikely that the EURGBP rally is here to last. Monetary policy from the Bank if England is expected to tighten soon and I would expect a move back to the recent lows of 0.8500 soon.

Resistance will be found at 0.8650/60 and again at 0.8690/0.8700. Only if we can sustain a break higher above 0.8720 will i give up on my EURGBP short.

Support initially will be at 0.8610/0.8600 and if broken I would expect to see further losses to 0.8570.

You can contact us at support@8dragonstrade.com

Published by Neil Callard

Forex Trader and Educator. 30 years trading experience, of which 20 years was market making in major currencies in large international financial institutions.

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