After the strength that we've seen in pound U.S. dollar over the last couple
of weeks, it's risen really strongly. But it could be near a major turning point.
Hello, I'm David Jones from capital.com. I thought it was time that we did an
update on the pound against the US dollar. It has been maybe something of a
roller coaster ride so far this year for GBPUSD. We've seen it trade in
a range of about 900 points over the first couple of months and over the last
couple of weeks we have seen a lot of strength come back for the pound.
We're getting closer to that deadline for Brexit and markets seem to be hoping,
based on what's going on in the political world, that we're gonna end up
with something better than a "no deal". Whether that's Brexit getting delayed, a
second referendum. Changes to the deal. Whatever it is, the markets' hopes have
been increasing and we've seen that reflected in the pound. So let's get into
it, let's take a look at the recent history for GBPUSD and the
big levels to watch, I think, over the next couple of weeks. As we go into March,
towards that Brexit deadline and see where we could have, maybe some trading
opportunities and some major turning points for GBPUSd, let's take
a look at some of the performance numbers for the pound against the US
dollar. Let's go right back first of all. The day before the Brexit vote in June
2016. So the pound closed around about 1.48 against the US dollar.
Of course since then we had the surprise where the UK voted to leave the EU, so
since June 2016 the pound has dropped by 10 percent, just over 10 percent, against
the US dollar over the last 12 months. So since February 2018 we've also seen
weaknes. It did start 2018 strong but peaked in April when we saw US dollar
strength come back against a clutch of major currencies. So the pound is trading
about 5 percent lower but over the last six months it has recovered. We saw a low
hit in the summer of 2018 and since then the price of the pound against the
dollar has bounced back by 3 percent. Let's just take a look at the big picture,
just to remind ourselves of the movements in the pound against
the dollar over the last two and half years. It's not hard to see where the
Brexit vote happened. We saw that.. that massive reversal over the next couple of
days when we had that surprise decision, compared to what the polls were
predicting at least. But it's more about what's been happening recently.
Let's take a look at the last few months for GBPUSd and the big levels to
watch. So here's the sell-off starting in April 2018 when the pound was trading up
at 1.44 against the US dollar. We saw that dollar comeback for the next six months
or so, putting the pound under pressure. But earlier this year we've seen it
break out of that trend and the story since then has been one of recovery.
So we do have this little recovery that's been going on all this year for GBPUSD
and at the time of recording it was trading at its best level since
September last year. Let's take a look at what the hurdles are now, because you can
see just since the middle of February, the pound has gained about 500 points, five
cents, against the US dollar. That's a big move in a couple of weeks. Looking down
here at the RSI, we're looking fairly overbought. The last time we were
overbought was in Jan, back here. The last week of January. And the market did turn
around, so I think there are some hurdles for the pound. Let's take a look at them
in a bit more depth. So when the pound was still declining against the dollar
into the summer of 2018 we had some hurdles left on the outside, some old
resistance levels. This is a big one around at 1.3480. Let's say.. let's say
1.35 GBPUSD. The market sells off into June, bounces back and again 1.337-6.
That sort of area. So not a million miles above where we're trading now.
So the recovery for this year is still intact. It just looks that maybe in the
short to medium term, with some of the.. the Brexit excitement over the last week
but maybe the market could have got a bit of ahead of itself when it comes to
the pound against the US dollar. So it wouldn't be surprising to see weakness
from here. But that recovery from earlier in January is still intact, so any drops
down to the 1.28 to 1.30 area, if people are looking to
follow this trend, they may well be looking to buy in at those levels. So the
trend for this year is up, we've seen it get a big boost because of political
developments towards the end of February to do with Brexit. I'm just wondering
if maybe it's some overshooting expectations at the moment. We have some
big barriers in place from 1.34 to 1.35 and they do look like they could be
something of a hurdle to any further progress. It's going to be an interesting
few weeks as the countdown to Brexit continues. We'll wrap things up there but
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on GBPUSD, from me David Jones and capital.com
we'll leave it there. Good luck with your trading!