GBP/USD expected rebounds to be sold into - Scotiabank

Shaun Osborne Chief FX Strategist noted that despite BoE’s survey of business conditions reported no sharp slowing of activity after Brexit, additional easing steps remain likely, however, and expect GBP rebounds to be sold into.

Key Quotes

“Sterling got hammered yesterday but has rebounded strongly today. The BoE’s survey of business conditions by its regional representatives reported no sharp slowing of activity after Brexit though agents did note that the referendum decision had caught businesses by surprise and had prompted a rise in uncertainty. The report has dampened expectations of additional BoE easing in August. UK data reports today also reflected stronger labour market data for June. We think additional easing steps remain likely, however, and expect GBP rebounds to be sold into.”

“GBP/USD short-term technicals: bearish—Cable broke under short-term support yesterday and dropped sharply before steadying and recovering overnight. Technically, the bigger picture for the pound remains intriguing as daily and weekly charts continue to hint at the potential for a rebound in price (if spot gets back above 1.35 or so). But the bear trend remains quite deeply entrenched in the market and, from a technical perspective, today’s rebound merely represents a retest of yesterday’s breakdown point. We see firm resistance around 1.3190/00 and continue to feel that shorty-term risks are geared towards a drop to the 1.28 area.”