GBP/USD - Pound in Free Fall after Brexit Vote - 07/06/2016 (GMT)

The GBP/USD pair remained under pressure as it continues the free fall, following the Brexit vote, extending its decline to 1.2790, level last seen in November 1985. The British pound fell more than 10% against the U.S. dollar following the EU referendum. It’s worth noting that the pair fell for a second consecutive month (May -0.92% and June -8.06%) and is now on track for its third negative month, -3.10% so far this month.

The technical outlook favors the downside as in the daily chart, the technical indicators have turned sharply lower within a bearish territory. In the 4-hour chart, technical readings also favor a downward continuation, with the price extending below all of our moving averages (50-SMA, 100-SMA, and 200-SMA). In addition, the 50-SMA, as well as the 200-SMA are now acting as a dynamic resistances around 1.3500 and 1.4000, strong technical and psychological levels. Therefore, for now, we remain bearish on this pair, targeting 1.2750 and then 1.2700. From the latter level, a possible rebound should be accompanied with the break of the oscillators above their mid-levels to confirm a pullback and the start of the correction phase. Without that confirmation, we remain strong sellers.

Much of the interest today will be on the FOMC Minutes, with traders hoping for a clue as to when the Federal Reserve will pull the trigger on the next rate hike. Elsewhere, Mario Draghi will be speaking, while from the U.S. we get the ADP jobs report on Thursday (expected: +159K), ahead of Friday’s NFP (expected: +178K).