Cable extends lower as the pound loses another potential hope for a rebound

Technical Analysis

Author: Justin Low | gbpusd

The pound fell after BOE hawk Saunders strikes a more dovish tone

GBP/USD H1 23-07
With Saunders validating market pricing that the BOE is moving towards a more easing monetary policy stance, it basically takes away one potential area the pound could hope for a rebound i.e. the BOE sticking to its "gradual and limited" rate hike guidance.

Saunders' remarks basically casts heavy doubt on that now and with him being arguably the most hawkish member on the committee, it's hard to imagine how else they will stick to that script if other members are seen to be more dovish than him.

The pound slipped a little on his remarks with cable falling from 1.2450 levels to a low of 1.2434 and is hovering just above that now.

Sellers remain in near-term control as price holds below both key hourly moving averages, having failed to break above the 200-hour MA (blue line) in yesterday's brief recovery towards the 1.2500 handle.

The next key risk event for the pound is the "coronation" of Boris Johnson as prime minister. With markets already having - to a larger extent - priced that in, be wary of a potential "sell the rumour, buy the fact" play in the pound in the event we see some short covering.

With the UK parliament set to observe a recess period from 25 July to 3 September, any Brexit developments (good or bad) may take a while to come to surface. So, there is good reason for pound sellers to book some profits from the recent move lower while waiting for that to play out in the coming weeks.

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