Halister News

(Bloomberg) -- Spread between GBP, USD 2-year swap rates tests down-sloping trendline from 2008 at -35bps, which may hold in stretched momentum conditions; that could lead to a compression of spread potentially toward -7bps, Bloomberg technical analyst Sejul Gokal writes.

• Daily momentum oversold with 9-day RSI at ~25
• Potential reversal of post-Brexit spread widening, and scope for move toward 1-year down-trendline and 200-DMA both located near -7bps; see daily chart here
• Long-term chart shows important trendline at -35bps being tested (see weekly chart here)
• July MPC-dated Sonia (GBP OIS) forwards price about a 78% chance of a 25bps cut, assuming the current 3bps-4bps spread of Sonia fixings below base rate holds: Inside U.K.
• NOTE: GBP/USD spot may squeeze to 1.35-1.36: MORE

• NOTE: Sejul Gokal is a technical strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.