FxWirePro Call Review: Pound nears target; short side target further extended to 1.17 against USD

The long-term GBP/USD call has been extremely profitable so far and we expect the trend to continue.

• In Late January, in an article named, “FxWirePro: Sell pound targeting 1.376 against dollar”, available at https://www.econotimes.com/FxWirePro-Sell-pound-targeting-1376-against-dollar-1122287, we urged our readers to go short on the pound at the then current rate of 1.413 and at rallies around 1.42 against the USD targeting 1.376.
   
• In a subsequent review, https://www.econotimes.com/FxWirePro-Call-Review-GBP-USD-target-reached-at-1376-new-target-1354-1177319 , we extended that target to 1.354
   
• And, later, https://www.econotimes.com/FxWirePro-Call-Review-Maintain-short-positions-in-GBP-USD-target-revised-lower-1315235 we have confirmed the 1.3 area as our next target and, only to revise it lower to 1.25 area in the next review here, https://www.econotimes.com/FxWirePro-Call-Review-GBP-USD-target-revised-lower-to-125-area-1336050

Fundamental review:

The fundamentals remain extremely favorable to our call for the following reasons,

• UK Prime Minister Theresa May continue to suffer outrages and protests within her own party members. More pro-Brexit members like Boris Johnson, who was serving as the foreign secretary has resigned in protest to her Brexit plans and ambition. The governing coalition is weak as Mrs. May continues to govern as a minority government with support from Irish DUP party, which has taken a tough stance on Irish border issue.
• Brexit remains as uncertain as ever with no major consensus on many issues and it is clear that the European Union, especially member countries are wooing Britain’s lucrative financial sector and that is not going to bode well.
• Growth has significantly weakened over the last year or so. In the second quarter of 2018, GDP grew by mere 1.3 percent y/y.
• The majority of the housing market indicators in the United Kingdom are flashing red signals. Weakness is evident.
• It is looking increasingly likely that Bank of England (BoE) would not be as hawkish as many would anticipate, largely due to the slowdown.
• Alliance with the U.S. looks weak as the duo has moved further away from the other on many global issues, such as climate change, Trans-Pacific Partnership (TPP), Iran Nuclear Agreement (JCPoA), Israel-Palestine conflict, and Trade. Trump’s trade war is not a good news for the UK.

Caution:

• The RSI oscillator shown in the chart is pointing to oversold signal, so bounce back possible and due.

Trade idea:

In this review, we would like to extend the final target for the pound from the current 1.25 against the USD to 1.17 against the dollar. The pound is currently trading at 1.278 against USD and the call is 1,350 pips in the money. However, one must note that this is a longer-term outlook, so short-term bounce backs possible. Bouncebacks are likely to be opportunities to resell and add positions.