GBP/USD consolidates near 30-year lows after UK downgrade

GBP/USD was unaffected by the UK rating downgrade and continues to move in a range, with support at 1.3130 and resistance at 1.3230, headed toward the lowest daily close in more than 30 years. The pound remains under pressure after the EU referendum results.

Recently the rating agency, Standard & Poor’s lowered United Kingdom sovereign rating from ‘AAA’ to ‘AA’ with the outlook negative. According to S&P the Brexit result could lead to a deterioration of the economic performance, including its large financial services sector, which is a major contributor to employment and  public receipts. It warned that on the long term it could diminish the Sterling’s role as a global reserve currency.

GBP/USD outlook

According to Valeria Bednarik, Chief Analyst at FXStreet point out that the bearish potential is strong, despite the extreme readings present in intraday charts on the back of the weak pound.

“Technical indicators in the 4 hours chart hover within extreme oversold levels with no aims of turning higher, as the price holds near the mentioned daily low, and far below its moving averages. The pair has now scope to extend its decline down to 1.3000 during the upcoming days, with a break below this last probably fueling the decline on panic selling”, explained Bednarik.