GBPUSD At The Edge Of A Major Selloff As Brexit Polls Raising Nervousness
On Tuesday (14/6), the British pound remained fragile near a two-month low against the dollar on worries over U.K leaving the European Union.
On Monday (13/6), four polls from three pollsters put the “Leave” campaign ahead of the “Remain”, and this has swayed the markets aggressively. Two new polls by ICM showed the “Leave” side mounting a 5%-point lead over the “Remain” camp. A YouGov online survey reported the “Leave” camp at 46% and the “Remain” at 39%, while an ORB poll put “Leave” at 49% and “Remain” at 48% among those certain to vote. Additionally, the Sun, Britain’s biggest-selling newspaper, supported a so-called Brexit on its front page.
These factors have put pressure on the sterling, and it has fallen to $1.41567 on Tuesday after closing at $1.42568 on Monday, the weakest settlement since April 19.
Earlier Today, The Office for National Statistics released the consumer price inflation report for May. Consumer prices rose by 0.3% in May, against expectations for an increase of 0.4%. The core CPI in May maintained the same pace of growth at 1.2%, compared with the figure for April. This represents a slight decline from economists’ estimate of 1.3%. British inflation has been below the Bank of England’s target objective of 2% for more than two years. Moreover, the British Input PPI in May rose by 2.6%, surpassing the reading of 0.9% in April. However, in the upcoming meeting, BoE policymakers may not put too much weight on the inflation data, given the uncertainty ahead of next week’s referendum on Britain’s European Union membership.
In the U.S, there is no doubt that the Fed will not act in its two-day policy meeting starting from Tuesday. The U.S Non-Farm Employment Change has created nervousness over the strength of the U.S economic recovery. In addition, the slipping crude oil price, which sagged back below $50 a barrel, is preventing inflation from reaching the target goal of 2%. The odds of a move by the FED in July have dropped to 16%, from a level of 53% at the end of May. The dollar index .DXY, which measures the greenback’s strength against a trade-weighted basket of six major currencies, stumbled to 94.36, down 0.03% from the previous settlement of 94.39.
Later today, the U.S Census Bureau will release retail sales data for May.It is estimated to come in at 0.4%, indicating consumers are becoming more apprehensive about spending. Markets are paying great attention to the FED’s policy meeting which is going to continue throughTuesday and Wednesday.
Fig. GBPUSD D1 Technical Chart
On the daily chart, the pair is continuing its downtrend and has hit a two-month trough at 1.40497. Continuing from a breakout recorded at the end of last week, GBPUSD is falling sharply out of the ascending range which had contained the pair for more than 3 months. RSI (14) is ticking down to 34.5380, while ADX has surged past the 20 threshold, signaling that the bearish trend is strong. The selling force is too strong and the currency pair is anticipated to fall further.
Sell stop at 1.41350, Take profit at 1.41080, Stop loss at 1.42220