GBP is expected to remain at gunpoint against the USD in the next succeeding days, but could still bring back sentiments with a busy data calendar.
Pound Sterling opened lower to a fresh week flat, settling at 1.2952, down from the earlier session high of 1.3121 and the September high of 1.3445 scheduled on the 6th.
The currency pair remained negatively aligned as it changed hands below short, medium and long-term moving averages.
Trader Phil Seaton said, "The British Pound continues to look bearish and macro capital flows remain negative the Pound at quarterly, monthly and weekly chart level. A breakdown through the recent lows on the daily chart could open the door to further significant declines."
Meanwhile, it has been wobbling since the 22nd of September 2016, within a strong downtrend between the range of 1.3118 and 1.2944.
Both sell-side and buy-side attempts to place a strong pressure of dragging the GBP/USD price.
The price is currently slightly oscillating above 1.2944 level, suggesting today’s major pivot point area.
Bond Yield Spread
The yield on UK 2-year government bonds significantly rallied 0.114% on September 23rd, and settled at 0.107% at the close of trade, with an added 2.6 basis points compared to September 22nd.
Further, the yield on US 2-year government bonds advanced as high as 0.787% on September 23rd, after showing a 0.758% decline at the close, with 1.6 basis points compared to September 22nd.
The spread between 2-year US and 2-year UK bond yields suggests the flow of funds in a short period of time, which narrowed to 0.651% on September 23rd from an earlier record of 0.693% on September 22nd.
The September 23rd yield spread has appeared to be the lowest level since September 19th, with a 0.673% difference.
Current Stance of the Pair
The chart below illustrates the currency pair’s movement amid the comparison of the UK 2-year government bonds and the US 2-year government bond data. Meanwhile, the currency pair is likely forming a symmetrical triangle, which has completed the first four waves “a-d” and is currently forming wave “e,” suggesting a minimum complement of waves is expected to form.
In addition, the triangle is likely to break lower than higher, relative to the previous trend. Thus, after the wave “e” is completed, it is expected to decline in the next succeeding sessions.
As the yield spread seemed to be the lowest level since September 19th, and as the chart above suggests a bearish formation with the symmetrical triangle, we conclude that the pair will likely decline.
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