Fairly upbeat PMI print out of the UK this morning inspired a brief rally for the GBP but as arguments point to sluggish productivity, the allure of buying the rally was short lived. I think the price action this morning, and really for the last month, continues to suggest that GBP rallies are to be sold as the UK election comes into greater focus and uncertainty forces the hand of GBP bulls. Couple that with what I think were fresh EURGBP shorts initiated at poor levels in yesterday’s session and the recipe is there for a weak GBP.
I continue to think that the ultimate move is lower for a re-test of the 1.4640 area (low made Mar 18) and beyond but as Brent has previously pointed out, the better position may just be in GBPJPY. Once again, we tested the 200d MA in yesterday’s month-end driven session and the failure to make gains above 178.30 suggests that the technical backdrop is in place for a lower cross. The key here is a close below 177 which has been incredibly elusive of late so I’m inclined to be short the cross but with ammo to add on a closing basis break of that key support level.