Cable continues to retreat, falling away from $1.3000 and trending toward a potential retest of its July low which could end in a breakdown or a double bottom. There are a number of potential news catalysts for GBP as well this week with a number of economic reports due for July showing the first full month impact of the Brexit referendum result.
Cable was crushed after the street was surprised by UK voters’ decision to leave the EU. After bottoming out in early July, an oversold GBP staged a trading bounce but this died out near $1.3500 after completing a common 23% Fibonacci retracement of the initial decline. RSI faltering near 50 confirmed that it was a trading bounce within a downtrend rather than a new upturn.
In recent weeks, GBPUSD has been under renewed distribution with $1.3000 support giving way and becoming new resistance. RSI falling away from 50, meanwhile, confirms downward pressure increasing.
The pair is starting to approach a retest of its July low near $1.2785 a key technical test which could end in a double bottom or the start of a new downleg.
Questions over the impact of the Brexit decision on the UK economy continue to have a big impact on trading in GBPUSD. The July rebound followed the quick end to the Conservative leadership race which helped to calm some of the uncertainty. Nervousness was rekindled by Bank of England Governor Carney’s decision to hit the panic button and restart QE asset purchases in addition to cutting interest rates.
GBP has been trending lower since the Bank of England decision. This week’s data may start to give an indication of whether Governor Carney acted prematurely or if his actions were justified. Although it may yet take a few months for the dust to settle and indicate the full impact of Brexit but in the near term, the first big announcements for July, the first full month since the vote could have a significant impact on trading in GBP pairs over the course of this week.
Key UK economic announcements scheduled include inflation (consumer, retail and producer prices) on Tuesday, employment on Wednesday and retail sales on Thursday.
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