GBP/USD: Downside potential for a decline to 1.38/1.40 - TDS

According to analysts from TDS, GBP/USD  could fall to the range between 1.38 and 1.40 in the weeks ahead.

Key Quotes:

“We think current levels offer an attractive entry point to fade the rally in cable. We continue to target downside potential for GBPUSD and think the time for a move lower will soon be at hand. With options markets still looking as expensive way to express bearish GBP views, we prefer to focus on opportunities in spot between now and the referendum date.”

“We think cable may trade down to the 1.38-1.40 range in the weeks ahead. This is our target for the anticipated move lower and where we expect spot to be trading on the eve of the vote. Regardless of where spot happens to be once voting is about to begin, we would recommend closing out GBP exposures as the risk of violent gapping moves associated with the referendum will rise substantially.”

“From our perspective, 1.4770 is the key threshold on the topside. This level should provide definitive resistance that, if broken, greatly enhances the technical case for an extension higher. As such, we think stops around the 1.4775 mark are needed to manage risk as a move higher from there would subsequently target 1.4806. In that case, we would not rule out the potential for an extension to 1.4990.”