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GBPUSD to revive from hard sell-off - Capital Street FX

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    • GBPUSD to revive from hard sell-off
25-Feb
12:19 IST

GBPUSD has tumbled for 3 consecutive days as market continues digest volatility in the event of possible Britain’s departure from the EU. The precious metal, Japanese yen and Swiss France witnessed great demand for safe haven, and the euro has recovered a little bit on disappointed data from U.S. service sector and housing markets, but the sterling still couldn’t escape sell-off trap.

Last session, GBPUSD dipped to the lowest of seven years to settle at 1.3924, down 0.67% compared to the opening price.

Prime Minister David Cameron announced the referendum vote of UK’s membership in the union on June 23. The EU issue has intensified deep split in the ruling party.

HSBC predicts the pound may loss about 20% if the people vote leave, whereas Morgan Stanley considers whether UK opts in or out, GBPUSD will drop to 1.30 at the end of the year. However, investors seem to over exacerbate the impacts of Brexit on the overall market. The sell-off is just initial phenomenon of sentimental uncertainty; therefore, the pound is expected to consolidate sooner or later.

In the context of almost no dominant news or events, currencies, commodities, and even stocks markets are moving hesitantly in modest waves without clear trends. The market is waiting for significant breakout in the next week, when the balance is breached.

At 7:30 a.m. GMT, U.K. GDP and Service Index were reported unchanged from previous numbers, but business investment unexpectedly dropped by 2.1% in Q4 2015. GBPUSD goes down to 1.3904 at 7:32 a.m. GMT, down 0.14% from the opening price of 1.3924.

At 1:30 p.m. GMT, U.S. Core Durable Goods Orders and Unemployment Claims will be released. In the absence of further news from Britain, USD under the influence of economic data will lead the pair.

GBPUSD 2502

Fig GBPUSD Daily Technical Chart

The pair has already stood at the bottom of seven years. Both EMA 14 and EMA 21 signal for further depreciating. Relative Strength Index (RSI) is flirting between 29 and 30 level in the oversold area which predicts upcoming rebound. However, it’s likely that impacts from U.S. market will roll back a possible recovery.

Trading suggestion

Buy at 1.3934 with Stop Loss 1.3874 and Take Profit at 1.4010

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