Sterling proves unprepared for new highs. Explore why Sterling is proving unprepared for new highs in our latest analysis. We delve into the economic factors, market influences, and recent performance trends affecting Sterling. Understand the reasons behind its struggle to reach new highs and get valuable insights for your trading strategies.
The British Pound has been under increased pressure over the past few weeks, facing serious
resistance as it tries to break important long-term levels against the Dollar and Euro.
GBPUSD exceeded its 200-week moving average at 1.2850 in July, repeating an attempt a year ago
to break a multi-year downtrend. Like a year ago, the pound failed to do so, and the market balance
has shifted back in favour of sellers.
The pound is trading at roughly the same levels from which it started the year, having rebounded from
1.23 in April and failing to stay above 1.30 in July.
Nevertheless, even the horizontal movement of GBPUSD is working in favour of the bulls, as over the
past three months, the pound has managed to consolidate above the resistance line of the
descending channel that has dominated since 2008.
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On the daily timeframes, the bullish view on the pound is being tested as GBPUSD has pulled back
towards the 200-day moving average at 1.2660 and is trading near the area of the late June lows. A
failure below this line in the coming days would be a more serious event than the April decline, as it
would show that the July reversal downwards was not just a technical correction.
The most important reason for the pressure on the pound is monetary policy, as the Bank of England
swiftly eased policy in response to falling inflation.
However, the impressive buying of the Euro against the Pound over the past fortnight cannot be
overlooked. The fall in EURGBP to near two-year lows has made buying euros against the pound
attractive, especially when it appeared that the ECB and the Bank of England were moving at roughly
the same pace in easing policy. For EURGBP, this is a pullback deeper inside the trading range of the
past eight years.
A decisive reversal to the upside for the EURGBP increases the chances of a bullish scenario
towards the upper end of the range near 0.9000. This will become the main scenario after
consolidation above the 200-week average at 0.8620.
