The outlook for Cable pretty much mirrors a lot of what we’re seeing in EUR/USD and with the Dollar hot again over the past week, it’s hard to fight momentum as the Pound itself has so few advantages for the moment. Looking at the pair, I maintain last week’s view here:
“Given that both central banks (Fed and BOE) have already sent a formal message that we are in the second half of the tightening cycle, is cable trading really a case of ‘who folds first?’ Fed or BOE In this case, it looks a lot like the latter.
As such, the path of least resistance is for the pair to move lower – all things being equal. Now, with the dollar accelerating across the board, the next test is at 1.1800 and the low for the year at 1.1759.”
If we see a firm break below 1.1800, this will set the stage for a steeper decline for the pair with March 2020 lows around 1.1410-1.1500. Given that things are lining up nicely for the dollar right now, it’s hard to rule out such a prolonged decline.