GBP Trade setups: outlook and research

We have looked at EUR/GBP in a previous post and in this article we will look at 3 more GBP pairs – GBP/AUD, GBP/NZD, and GBP/ZAR. Here we will look at the fundamentals which make us long term GBP bullish and also the key technical levels of support and resistance.

Fundamentals and Sentiment

In terms of the GBP we are bullish long term in most crosses for the Following three reasons:

While the UK has been hit hard by lockdowns but it’s now leading the world in terms of the speed of vaccinating the population. The markets are forward-looking and we expect this speed of vaccinations to result in strong second-quarter growth.

The UK is seeing inflation rise and come in the above forecast which rules out negative interest rates from the BoE which many in the market had been seeing as a realistic possibility.

The GBP is historically very oversold due to Brexit – while the UK has now left and a trade deal has been done, The GBP was sold off hard into the agreement and has overshot fair value on the downside. We now expect the GBP to move up to correct this undervaluation.

In terms of the markets, we have risk on at present but if we were to see a move to risk-off the GBP would get an additional boost against the AUD, NZD, and ZAR.

While the GBP is oversold both the AUD and NZD are overbought with both benefiting from strong commodity prices and the market perception that we will see a quick V-shaped global economic recovery this year which is now discounted in our view. Commodity prices have risen strongly in recent months but speculators have driven prices too far and we expect the commodity complex to correct which will weigh on the AUD and NZD.

Lower commodity prices are also bearish for the ZAR. Also in terms of South Africa, the new virus strain is bearish and economic activity has peaked in our view. Finally, the ZAR will be hurt severely by any move to risk-off which we think could happen in the coming weeks.

Technical Analysis

In terms of the key technical levels of support and resistance to watch in our view on the chart below.

GBP/NZD

GBP/ZAR

GPB/AUD

Research provided by LearnCurrencyTradingOnline.com

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