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GBPUSD Looking to Burst Support on Negative Brexit Talk

GBPUSD Looking to Burst Support on Negative Brexit Talk

2018-08-06 08:00:00
Nick Cawley, Strategist
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Sterling Prices, News and Analysis

  • Sellers remain in charge as Brexit talks turn negative.
  • Support under pressure and looks likely to crack.

IG Client Sentimentshows retail are 72% net-long GBPUSD, a bearish contrarian indicator. See how this indicator can help your decision making.

GBPUSD Struggling as Important Support Nears

GBPUSD is struggling to hold the current lowly levels and may break even further lower as the British Pound weakens on negative Brexit news while the US dollar remains firm on higher interest rate expectations. Over the weekend, UK international trade secretary Liam Fox said that there is now a 60-40 chance of a no-deal Brexit, saying “the intransigence of the EU Commission is pushing us towards a no-deal”. This latest caution follows a warning from Bank of England governor Mark Carney last Friday who said that the risk of a no-deal Brexit was uncomfortably high. Late Thursday the BoE raised interest rates by 0.25%, initially boosting Sterling, but the rally was short-lived as the central bank pushed back expectations of the next hike. Ahead this week the calendar is relatively clear until we get the preliminary UK Q2 GDP reading on Friday at 08:30 GMT.

GBPUSD is caught between two notable levels and is likely to break lower. The pair is stuck between the November 2017 double-low at 1.30430 and the July 19 near one-year low at 1.29720. Below here, the August 2017 swing low at 1.27738 should provide strong support in the short- to medium-term. On the upside, a break above 1.30420 will bring into play the 20-day moving average at 1.31040 and the 50-day ma at 1.31888. The RSI indicator is nearing oversold territory but as witnessed between the end of April and the end of May it can stay lowly for some time.

We have recently released our Q3 Trading Forecasts for a wide range of Currencies and Commodities, including GBP and USD.

GBPUSD Daily Price Chart (February 2017 – August 6, 2018)

GBPUSD Looking to Burst Support on Negative Brexit Talk

DailyFX has a vast amount of updated resources to help traders make more informed decisions. These include a fully updated Economic Calendar, and a raft of Educational and Trading Guides

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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