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GBPUSD Price Continues to Press Lower, Testing Support Levels

GBPUSD Price Continues to Press Lower, Testing Support Levels

Nick Cawley, Strategist

Sterling (GBP) Talking Points:

  • No change after latest EU Summit.
  • Sterling remains under selling pressure.

The DailyFX Q4GBP Forecast is available to download.

GBPUSD – Negative Sterling Sentiment Remains

The latest EU Summit meeting ended yesterday with a familiar refrain from the European Union, saying both sides are close to agreeing a deal, but the UK must come up with a way to break the Irish border impasse. This lack of forward momentum will continue to weigh on the pound as the March 31, 2019 nears. In addition, UK PM Theresa May confirmed that she had talks with the EU about a potential extension of the transition period, something that will not go down well at home and puts her position as Prime Minister under further scrutiny. With the November ‘emergency’ meeting seemingly cancelled, the mid-December European Council meeting now becomes critical in the Brexit process if any deal is to be reached.

Even if a deal is agreed at the last minute, the PM must get the bill voted through an increasingly fractious UK Parliament, something that currently looks unlikely, whatever the make-up of the EU/UK agreement.

The daily chart shows yesterday’s sell-off took us through the Fibonacci retracement level at 1.3067 with ease. More importantly cable closed below this level which adds extra credibility for a move lower, leaving 1.29221 and 1.27856 as the next two support levels ahead of the multi-month low at 1.2662. Brexit headlines, at any time, may still turn market sentiment supportive for GBP but as we stand the path of least resistance for GBPUSD is lower, especially against an ever-strengthening US dollar.

US Dollar Index Daily Price Chart (January – October 19, 2018)

GBPUSD Price Continues to Press Lower, Testing Support Levels

Recent Sterling/Brexit Articles:

Brexit Latest: PM May Needs Support from a Fractured Cabinet.

Brexit Analysis: How GBP and Stocks Might React to Alternative Outcomes.

GBPUSD Daily Price Chart (March - October 19, 2018)

GBPUSD Price Continues to Press Lower, Testing Support Levels

IG Client Sentiment data show that retail traders are 65.9% net-long GBPUSD, a bearish contrarian set-up. However, recent daily and weekly positional shifts give us a stronger bearish trading bias.

Traders may also be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

--- 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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