GBP/USD ‘Cable’

Cable, having been under pressure in H2 2016 following the UK’s EU referendum and the US presidential election, has been somewhat quiet during the first quarter of 2017. In the first quarter, the pairing traded an early low of $1.1983 on 15 January based on Brexit concerns before rallying to its highest traded price of $1.2707 only two weeks later on 2 February. It has remained range bound since then. Will Q2 see a break of its narrowing channel?

Brokers are currently negatively biased for Cable’s prospects according to Bloomberg data, with 68% of brokers forecasting downside to the current price, while average target price is 1.3% lower than its current level. Recent updates show some conflict amongst brokers, with Credit Suisse on 5 April forecasting a $1.25 end-quarter figure, while Bank of America Merrill Lynch are far more bearish, forecasting a $1.15 end-Q1 target on 3 April.

Events: Fed – 3 May, 14 Jun; BoE – 11 May, 15 Jun; Trump & Brexit – ongoing!

GBP/EUR

This currency pairing could prove to be the most interesting over the coming two years as Brexit negotiations make their mark on the relationship between the UK and mainland Europe. The currency pairing has followed a similar trading pattern to Cable, although Sterling has made a much more marked recovery against its European peer. Similarly to GBP/USD, it traded at its low of €1.1827 on 15 January, while it took a little longer to trade a high of €1.1901, reaching the mark on 22 February. It also remains in a narrowing trade pattern as we move into Q2.

Brokers are currently negatively biased for GBP/EUR prospects, with 64% of brokers indicating downside to the current price, while the average target price is 0.5% lower than the current trading level as suggested by Bloomberg data. Once again, recent updates from brokers suggest mixed outlook, with a bullish 5 April forecast from Jyske Bank of €1.2195 at odds with Bank of America Merrill Lynch’s €1.1236 end-Q1 target.

Events: French Election – 23 Apr & 7 May; ECB – 27 Apr, 8 Jun; BoE – 11 May, 15 Jun; Brexit – ongoing!

EUR/USD

The Euro has been on a tear against its US peer since trading a 13-year low on only the second session of 2017. Since trading that low of $1.03401 on 3 January, however, it has recovered strongly, culminating in the pairing trading at its highest level since the US election on 27 March at $1.0906. While it has since fallen back below $1.07 having been hindered by 11-month falling highs resistance, it remains a way off January’s lows. Trading in a rising channel, could Q2 see the Euro overcome that long term resistance to post a fresh 5-month high?

Brokers are negatively biased for EUR/USD prospects, with Bloomberg showing 62% of brokers’ targets showing downside to its current price, while average target price is 0.6% lower than at present. As before, brokers have differing forecasts on the Euro’s prospects, with Credit Suisse (5 Apr) once again bullish a $1.10 end-Q1 target, while BoA Merrill Lynch (3 Apr) continue to be bearish, expecting a $1.02 figure at the end of the quarter.

Events: French Election – 23 Apr & 7 May; ECB – 27 Apr, 8 Jun; Fed – 3 May, 14 Jun; Brexit & Trump – ongoing!

On the following three pages, we take a closer look at the technical indicators behind these three hugely popular currency pairings. What will you make of the analysis? Is your preferred currency set to move higher in 2017?