GBP Plunging to Multi-Months Lows

Mar. 1.10 | About: iPath GBP/USD (GBB)

The British pound is plunging to multi-months lows at a time when the other major pairs have barely moved. This is ahead of a week that is packed with very important news reports (4 interest rate decisions plus the Non-farm Payroll), which shows that institutional traders have cut their exposure towards the Gbp.

It has been noted that U.K. gilts are higher than the same maturity bonds in Europe and the U.S., and these higher yields reflect the market’s concern over the country’s deficit. U.K. elections are approaching, which historically are very unhelpful for budget deficits and for tackling important fiscal issues such as these.

The next red-flag reports coming from the U.K. are the Halifax HPI (House Price Index) on Tuesday, Services PMI on Wednesday and the Bank of England monetary policy decision scheduled on Thursday. The rate decision will be by far the most important, and has the potential to set the direction of Gbp trading over the upcoming period.

If the BoE decides to inflate the economy by devaluating the pound, it would not be a surprise to see the Eur/Gbp marching towards parity.

4 Hour Chart Flows: Short. Price Points: 1.5320 Looking for: A Short, wave 5

Momentum: The cable trend went Short on 3rd December, and has meandered sideways since then. The pair can be just as easily bought as sold.

TheLFB Charting: Gbp/Usd 4h view

Elliott Wave: Gbp made another push into new lows as expected, after the blue wave (iv) found the top at 1.5320. A blue wave (v) has broken through the lows of a blue wave (iii) which suggests that a down-trend may be a near completion. However, it’s not easy to call the bottom here, so we need to see a break above the 1.5320 area before we can confirm a bullish reversal.

Disclosure: No Position