GBP/USD absence of major support ahead of 1.05 - Scotiabank

Eric Theoret, Strategist at Scotiabank, said that GBP/USD is seen falling toward 1.2500 and he also noted the absence of major support ahead of 1.05.

Key Quotes

“GBP is quiet, consolidating around Tuesday’s close following a drop to a fresh, marginal, multi-decade low under 1.27. Fundamentals and BoE commentary have delivered support, with an upside surprise to the services PMI (52.6 vs. 52.2 exp.) and confidence from BoE MPC member Broadbent in which he highlighted the stimulative influence of a weaker exchange rate and the U.K. economy’s resilience in the aftermath of the referendum. The 2Y U.K.-U.S. yield spread continues to widen, falling to fresh lows under -70bpts. Measures of sentiment are delivering added pressure as implied GBP volatility continues to climb across a range of time horizons, delivering a steady rise in the premium for protection against GBP weakness.”

“GBPUSD short-term technicals: bearish—momentum signals are bearish and the RSI is just above the oversold threshold at 30. DMI’s are providing confirmation and moving averages are bearishly aligned across a range of time horizons. The break of 1.27 has been short-lived, however we continue to look to weakness toward 1.25 and note the absence of major support ahead of 1.05.”