GBP/USD bearish with caution – Scotiabank

Eric Theoret, FX Strategist at Scotiabank, sees the initial relevant support in Cable at 1.2720 ahead of 1.2652.

Key Quotes

“GBP’s recovery coincided with the release of as-expected preliminary (2nd of 3) GDP data for Q2 as market participants considered details that included material upward revisions to trade. We note the potential for a bullish outside day (see techs below). Speculative positioning remains bearish GBP and risk reversals are suggestive of a continued, gradual build in the premium for protection against GBP weakness. The 2Y spread has widened nearly 5bpts this week, in a GBP-negative manner, pushing back toward the lower end of its August range”.

“The broader technical picture remains overwhelmingly bearish across daily trend and momentum indicators however we note the potential for a bullish outside day on a break above 1.2834. There are no major support levels ahead of 1.2720 and the 200 day MA at 1.2652. Resistance is expected above 1.2850”.