Introduction

The pound has been experiencing a bleak outlook on the technical front, causing concerns that it may return to the low points of 2016. The ongoing Brexit negotiations, coupled with the COVID-19 pandemic, have contributed to the decline, making investors more cautious and worried about the strength of the sterling. In this article, we will look at the reasons behind this sentiment and explore the likelihood of a return to the 2016 lows.

Brexit Uncertainty

The main reason for the pound's bleak technical outlook is Brexit. The ongoing negotiations with the European Union have been a source of uncertainty and volatility for the pound. With a no-deal Brexit looming, investors have become more cautious and have been selling the sterling. This has caused a downward trend in the pound's technical indicators, such as its moving averages and the relative strength index (RSI).

COVID-19 Pandemic

The COVID-19 pandemic has also played a role in the pound's decline. The UK, like many other countries, has been hit hard by the pandemic. The lockdown measures taken to curb the spread of the virus have caused economic instability, resulting in a weaker pound. Additionally, investors have become more risk-averse due to the uncertainty surrounding the pandemic, causing a shift away from the pound and towards safer assets, such as the US dollar and the Japanese yen.

Technical Analysis

The pound's technical analysis is a cause for concern for investors. The pound has been trending downwards against the US dollar, and its moving averages are pointing downwards, indicating a bearish trend. Furthermore, the RSI is below 50, indicating that the pound is oversold and that there may be more selling pressure in the future. All of these indicators suggest that the pound is likely to continue its downward trend, possibly returning to the lows of 2016.

Conclusion

In conclusion, the pound's technical outlook is certainly gloomy, with Brexit and the COVID-19 pandemic contributing to the downward trend. With the ongoing Brexit negotiations and the rising COVID-19 cases, investors are likely to continue to be cautious in the coming months. While there is always the possibility of a rebound, the pound is likely to continue its downward trend and could possibly return to the lows of 2016. Investors should be wary and consider diversifying their portfolios to mitigate the risk of a weak sterling.