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25.09.2020 09:23 AM
GBP/USD: turning point for the pound's bulls

The position of the pound has largely shaken by several negative developments related to the economic outlook and uncertainty over Brexit from the EU. According to experts, now comes a critical moment when the pound can pass the point of no return.

The British currency has approached a really important level of 1.2700 and in case of a break through, it will be able to turn its dynamics by 180 degrees. CitiBank experts believe that this level is fundamental, since the 100 - and 200-day moving averages pass near this level. Therefore, the critical moment is coming for the pound — its further dynamics will depend on breaking through this level.

The current situation is crucial for the bulls of the British currency. They will have to seriously "fight" with the bears for a place under the financial market. In February of this year, the GBP/USD pair kept the bearish dominance. As a result, the pound returned to the level of 1.3200. Today, the indicated pair is trading near the range of 1.2746-1.2747.

On another note, the information provided by the Confederation of British Manufacturers (CBI) was the main factor that supported the GBP this week. The data turned out to be more positive than economists expected and based on the CBI report, the retail sales balance increased from -6 points to +11 in the first month of autumn. Analysts were pleased who were expecting a drop to -10. Meanwhile, experts say that the total balance of sales in the retail, wholesale and automotive sectors rose from -9 to -7.

The current situation is complicated by a rather tense atmosphere in the financial markets. The pound's growth is being held back by widespread negativity about the global economic recovery and the exhausting uncertainty surrounding the upcoming US presidential election. Citi emphasizes that if the tension rises, the GBP/USD pair may plunge into a downward spiral, breaking the barrier of 1.2700 and approaching 1.2624 - 1.2626. But experts do not rule out a pullback to the lows of June this year (up to 1.2250), and to the May values below 1.2100 in the future.

According to experts, the British currency, moving around to such turning points, can surprise the market with both a sharp rise and a decline. However, much will depend on the situation in global markets, as well as on where Brexit lies — is it towards accepting a trade deal or leaving the EU without an agreement? Experts made it clear that this issue remains relevant for the British economy.

Larisa Kolesnikova,
Analytical expert of InstaForex
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