Bets on GBPUSD decline

07 November 2022 81
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Let's have a look at what factors indicate a downward movement of this pair:

 

1. Fundamental conditions.

 

Firstly, existing risk of a long-term British economic recession keeps pressuring the pound.

Secondly, there is a contrary sentiment of the British and American regulators concerning the further prospects of policy tightening. The Bank of England officials have announced that the upper bound for rate raising will be lowered, while the Federal Reserve, on the contrary, states that the "space" for tightening will be expanded. Such policy diversity has already been referred to as the transatlantic divide.

The prevailing sentiment difference facilitates strengthening of the U.S. dollar and decline of the British pound.

 

2. From the technical point of view GBPUSD appears to have broken away from the downward resistance line, giving a clear signal that the downward trend is likely to continue.

 

3. The last, but not the least thing we should add is a seasonal pattern of the currencies' behavior.

 

Below we have an averaged 25 year moving directions of the currencies.

 

 

 

It can be seen on the chart that approximately from the beginning to the third decade of November, the U.S. dollar tends to strengthen against the pound.

 

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