Pound Sterling Stems Decline

By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

On Monday morning, the British Pound stopped its significant decline against the USD, but it’s still pretty far from reaching stability. The British currency will remain under serious pressure until the country’s Parliament votes on the Brexit agreement with the European Union. We remind you that the voting was canceled last week because the Prime Minister Theresa May thought the situation wasn’t in favor of a positive outcome.

Meanwhile, consumers and businesses are reconsidering their position on the potential consequences of Brexit. According to the Rightmove agency, the country is overwhelmed by the plunge of real estate prices, which have already reached six-year lows. By December, they had been plummeting for two consecutive months. On YoY, the indicator added only 0.9%, the slowest growth over a very long period of time.

In the comments, the agency stated that the real estate market wasn’t moving anywhere due to high economic and political uncertainty. In addition to that, it was said that the current decline would be followed by an off-peak season. As a result, no one is expecting any rebounds on the British real estate market.

This recession is not a good signal for the British currency. As a rule, real estate in the country has always been too expensive, although the population could afford to pay extra money for a square meter of living space. The situation is obviously changing right now and if the Brexit proceeds according to the “tough” scenario, the British economy may find itself in a serious drawdown.

As we can see in the H4 chart, GBPUSD seems to continue its stable descending movement. However, it’s just a first impression. It’s not deceptive, but shouldn’t distract us from other scenarios. The pair has completed the previous descending impulse and right now is trying to start a new rising structure. To confirm a possible mid-term ascending movement, the price has to reach the resistance line and then test to break 1.2712 and fall towards 1.2637. The key upside target will be the resistance line of the projected channel at 1.2835. In case of a further decline, the key downside target will be at 1.2285.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Having majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.