Looking at the Cable’s daily chart, it looks like the pound is poised to move lower yet again. Notice how the GBPUSD is forming a bearish pennant pattern. During the past couple of days, the pair has been consolidating into a descending triangle. It could continue doing so for a little while since the stochastics are already in the oversold area. But if the pennant’s or the triangle’s support at around 1.4250 gets taken out, investors could further buy the US dollar in exchange of the Sterling, pushing the pair even lower. The minimum downside target here would be 1.4000. However, if for some reason the pair breaks above the pattern’s resistance (descending line of the triangle or pennant), it could aim for 1.4600. Nonetheless, the bias remains bearish given the pair’s overall downtrend.
Fundamentally, today’s drop in the euro has also weighed on the other non-dollar currencies like the British pound. The European market suffered another heavy blow awhile ago with the FTSE 100 losing about 1.50%. The risk aversion from the market due to the ongoing fiscal crisis in Greece has caused traders and investors to leave the euro and the pound for the safety of the US dollar and the Japanese yen. Further selling pressure on the euro and pound could still be seen if Germany votes to minimize its contribution on the $1 trillion aid package for debt stricken countries like Greece. The EU-member nations shall vote on their respective shares tomorrow (May 21). Expect some volatility ahead. Stay tune!