Home GBP/USD bears take out key support before Christmas, rubbing salt in the wound
FXStreet News

GBP/USD bears take out key support before Christmas, rubbing salt in the wound

  • GBP/USD falls to fresh daily lows in last-ditch attempt by bears to take out Oct 21 highs/key support.  
  • Brexit remains the main driving factor for the pound and PM Johnson  threat of a no-deal Brexit as a negotiating tactic prevails.

GBP/USD is currently trading at 1.2924 having travelled between a higher of 1.3032 and 1.2904, currently down 0.55% on the day so far despite a disappointing US Durable Goods number. It appears that the bears remain hungry into the closing sessions for the Christmas holidays with GBP the weakest on the charts and now below key support.

It has not been a good time for the committed bulls refusing to bail ship, for sterling has been in freefall, only pausing for brief technical moments before plummeting again to fresh lows. It is now below the 21st Oct highs and key support on the charts.

PM Johnson has been using the threat of a no-deal Brexit as a negotiating tactic in the forthcoming trade talks with the EU which has seen the price of GBP fall from 1.3514 post-UK election highs to a low of 1.2905. Despite UK data and the Bank of England, Brexit remains the main driving factor for the pound.  

A saving grace could be a weakness in the US dollar

Cable’s only saving grace could be a weakness in the US dollar as attention is drawn to high-risk assets considering that a phase-one deal is due to be signed between the US and China in January, stripping the buck of some of its safe-haven quality. That said, trade wars are far from over and there is no cherry on the cake in a phase one deal. Moreover, the two sides have irreconcilable objectives which likely means plenty of risk-off to follow and support for the greenback. A dent in the greenback came following a shoddy Durable Goods report earlier in the session for November, arriving -2.0% vs an estimated 1.5% and prior 0.5%. However, this is in contrast to better than expected US economic data that had lent support to the USD towards the end of last week.  

BoE in focus

Meanwhile, the Bank of England recently left rates unchanged in a 7-2 vote, and the policy guidance was identical to that of September. “The core of the MPC is still looking for growth to pick up to above potential in the first half of 2020 as political and trade uncertainty abate. If that fails to materialise, then odds of a rate cut will rise,” analysts at TD Securities argued.  

  • GBP/USD Price Forecast 2020: Pound may continue to fall on hard Brexit deadline

As noted by Haresh Menghani, Editor at FXStreet, in its December policy statement, “the BoE lowered the forecast for quarterly growth in the final three months of 2019 to 0.1% from 0.2% but expected the economic growth to pick up in early 2020. The UK central bank, however, warned that monetary policy might need to reinforce the expected recovery in UK GDP growth and inflation if global growth failed to stabilize or if Brexit uncertainties remained entrenched.” More on that here within Haresh Menghani’s 2020 outlook for cable.  

GBP/USD levels

Meanwhile, on a technical basis, bears have  taken out Oct 21 highs/key support and the scope for upside has diminished with the price below the 21-day moving average as bears embark on a run to the November lows down at 1.2768 with a focus on the 200-day moving average a 1.2692. Bears will be keen on at least a 50% mean reversion of the recent swing lows and highs that falls in a around 1.2730. Bulls will seek the 1.33 handle if 1.29 holds up.  

FX Street

FX Street

FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market. It was launched in 2000 and the portal has always been proud of their unyielding commitment to provide objective and unbiased information, to enable their users to take better and more confident decisions.