Why it's a bad idea to fight the GBP decline ahead of the BOE

From BNP Paribas:

GBPUSD hit the 1.30 tactical target we established in the immediate aftermath of the referendum, trading to a low of 1.2798 as risky assets underperformed in Asia, and we continue to see risks as lying to the downside for the pound. 1.2753, which represents a June 85 weekly low, is viewed as an important support on the downside.

The next catalyst for a GBP sell-off could come from the Bank of England next week. In our view the market is still likely under-pricing BoE easing, with our economists forecasting a 25bp rate cut next week followed by a 25bp cut at the August meeting and GBP 100bn worth of QE (including corporate bonds) to be announced by the November meeting. Lower rates and reduced FDI should leave the GBP vulnerable for some time to come.

GBP is on a road to parity

The GBPUSD bounces to the upside from the 1.2800 level, but the bearish trend is still in place. The 1.3200 level may act as resistance in case of a pullback.

Do you mean 1.00? Because there's still a long way until it reaches that, even if it's dropping so much now.

First step should be 1.2.

Then, once when it is clear that there is no way back, the real decline starts. Then we shall see 1.00

Taking a pause. Let see what happens next

The bullish pullback on the GBPUSD may take it to the 1.3200 level, the most important support now on the daily chart is the 1.2800 level.

The British pound started the week with an increase, recording a second consecutive positive session. The pair climbed 41 pips to 1.2991, but remained at a record low for the past 31 years levels. The daily limit values were noted at 1.3017 and 1.2850. Bears remain in a leading position, but relative strength index issued for weakness. Break of 1.3110 will contribute to positive attitudes with probable next target 1.3530.

Good pullback on the GBPUSD, stong rally, but on the medium term the trend is still bearish. Be careful with a surprise drop.