Home GBPUSD: Brexit Fears resume the downtrend

GBPUSD: Brexit Fears resume the downtrend

Fundamental factors:

  • The pound fell to a two-month low after Theresa May added to fears that Britain is heading towards “Brexit”.
  • In the previous week, UK PMIs Pointed to expansion and beat their estimates, but the pound was unable to gain strength against Dollar.
  • Dollar strengthening against Pound could drift the pair lower towards 1.1900/1.1185 levels.
  • The uncertainty and fear of Brexit are expected to persist on the pound, which could intensify the selling pressure ahead.
  • Trump Press Conference and May talks at Prime Minister’s Question Time on Wednesday would closely watch. However, expecting same lines from both which was there in the previous year.

GBPUSD Daily Chart:

EURGBP Daily chart

Technical Factors:

  • As seen above in daily chart of GBPUSD, the pair has found resistance near downward sloping channel, breached the short term support of 1.2200 and resumed the downtrend in the form of minute wave v of minor wave a.
  • The pair has formed an inverted Cup and handle pattern (Shown by dark blue color on GBPUSD daily chart). The move below 1.2200 has provided the breakdown in the pattern accompanied by kink up in momentum oscillator ADX of 14 days (shown by circle). Inverted cup and handle works brilliantly in the bear markets.
  • From pair trading strategy, EURGBP has resumed the uptrend in the form minute wave b of minor wave 4. This confirms the downtrend for GBPUSD in the coming days and GBPUSD could underperform against EURUSD.
  • In short, GBPUSD has resolved the downtrend and it could move lower towards 1.1900/1.1850 over short term which is 0.618of minute wave iii.