Is The Pound Sterling Overvalued?

The pound sterling corrected some of its recent gains against the U.S. dollar after the GBP/USD failed to break above 1.2660. As we stated in previous analysis, we expect an even stronger correction that may lead to a slide back towards 1.24 in the near-term. Some investors are even most bearish on the pound, saying the market has to go much further in pricing out Bank of England rate hikes. Some market participants think that the pound is overvalued in the long-term pointing on concerns over U.K. financial imbalances.

However, from a technical point of view the GBP/USD remains in a downtrend with a next resistance seen at 1.2680. Sterling bulls may prefer to wait until 1.27 is cleared to jump in on buy attempts toward 1.30.

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Long @ 1.2620

Short @ 1.2560

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