Originally published by AxiTrader
Key takeaway
It's not just the Bank of England who still doesn't trust the UK economic outcomes recently.
Despite the continuation of better than expected data in recent months Sterling has retained a negative bias from most forecasters who expect the GBP/USD rate to gradually continue to fall.
That's one of the reasons the topside has been capped even though UK data has ben shooting the lights out. And it's the weight of overhead resistance that looks like it is finally starting to weigh on USD/GBP which is slipping lower again.
What You Need To Know
My morning video is, I think, the best thing I do each day. BY the time I get around to it I have been writing about and researching markets for at least 5 hours. So I've assimilated a lot of information which is added to the bank of information I've already accumulated over previous days, weeks, and months.
One of the things I've noticed about the video - which is one take unscripted - is that I often say something that I didn't realise I thought. That is I express a view on an asset or market which is the crystallisation of all this work but not actually a conscious thought.
It's why my personal trading decision are made after, and almost never deviate from, the outlook I express in my morning video. It has become my online diary.
So it was noteworthy yesterday or the day before (I don't recall which) when I said during the video that it looked like the GBP/USD was headed back down toward 1.20/1.21.
That view articulated both the technical view and a recognition that the press and market chatter about the UK economy had started to turn negative once again.
The fact that this was despite solid data prints was instructive behaviourally.
Indeed the magnitude and consistency of UK economic data beating expectations while GBP/USD has been trapped below 1.27/28 since the October flash crash low speaks volumes - screams even - how distrusting forex traders and investors globally are of the economies ability to hold the post Brexit bounce.
You can see that in the Reuters poll forecasts for GBP/USD as well. Here's a screen grab from my Eikon terminal.
What's also instructive is that last week's GDP print was deconstructed by many analysts to focus on the negatives. Last night's release of the Markit manufacturing PMI - showing a fall to 54.6 from 55.9 last and expectations of 55.6 was just another reason to sell the pound.
That's driven the price to 1.2296 this morning - more than 250 points lower than where it was at last week's highs.
Last night's move also broke GBP down and through the bottom of the February range which seems to suggest my video comments, and the opening up of lower possibilities are increasing in possibility.
Looking at the chart of GBP this range break opens up a move toward the previous downtrend line which sits at 1.2145 at the moment.
The data can still rescue GBP from lower levels. But as the US Federal Reserve ups the ante on rate hike rhetoric, and as the US dollar continues to strengthen the bias appears to be for a lower pound.
Have a great day's trading.