The British pound currency continues to plunge on the foreign exchange market against the US dollar, following the disastrous budget delivered last week by the United Kingdom’s new Chancellor.
Geopolitical tensions in Eastern Europe have also caused European markets and stock markets across the eurozone to plunge. Russian President Vladimir Putin has announced a full mobilization of trooping setting the precedent for a much-larger escalation.
Currently, the British pound is approaching levels closer to the all-time low of 1.0520 in 1985. If this level breaks then I think we could easily see 1.0200 or even parity.
MUFG bank have a similar view and the analyst team note that “We remain bearish GBP as it approaches levels closer to the all-time low of 1.0520 in 1985. There is certainly no ‘happy-feel’ to this fiscal give-away and appears if anything to have increased the level of uncertainties that were already very elevated.”
The bank added “Furthermore, the renewed sell-off in global equity markets and tightening of global financial conditions make it more challenging to finance the UK’s elevated current account deficit reinforcing downward pressure on the GBP.”
Looking at sentiment data and how traders feel about sterling, the ActivTrader Market Sentiment tool shows that buyers are not giving up despite the recent sharp price drop.
With 70% of traders currently bullish, it should be noted that this current sentiment reading is significant enough to signal more losses, as traders are now basically overweight sterling. This is still a very bearish sign for sterling.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame, an extremely large expanding descending wedge pattern has broken to the downside. This is very bearish.
According to the overall size of the pattern, and assuming we stay below the 1.1200 level, I would expect that we could soon see a move towards the 1.0200 level.
GBPUSD Medium-term Technical Analysis
According to the daily time frame it shows that that GBPUSD pair has now ignited the range low and also a huge head and shoulders price pattern.
According to the size of the bearish price pattern an 800-point move could take place once a break from the pattern takes place. As mentioned, these patterns are typically bearish.