The New Year opened up with a big slide on Jan 2nd for GBP/USD bringing to close at 1.53242 and opening up for more room for further downward movement. On the monthly chart you can see it tried to go through the Ichimoku cloud last year in June & July but failed, leading to the bear trend we are currently in and breaking the downside of the Ichimoku cloud in November 2014. I really see medium term trend target at 1.35000 area. Short term support I would see 1.4875 area, as it starts to stray away to far from it’s weekly Ichimoku cloud. Well seems clear from the Technicals what about fundamentals? I don’t see UK economy picking up at the same rate as the USA, general EU economic slowdown will also affect the UK. Looks like fundamentals match too.
A break below 1.50 seems probable now but don’t rule out any bearish rallies before that drop happens. GBP/USD has a few risks on the horizon, for one thing there is a general election in the UK in May. There’s also the situation in Europe to consider. The bank of england has said that the UK economy won’t be immune to the downturn and deflationary environment there.
The rate cycle in the UK is well behind that of the US. On the technical view GBP/USD has a floor of 1.40 and seldom sinks below that level but given the strength of the dollar we could see new lows being reached further along and a new context emerge.