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  • GBP/USD is currently en-route for the 1.28 handle as the dollar gives back some easy ground that was invaded on the Turkish currency crisis initial headlines earlier this month.
  • However, despite EM-FX that is under pressure, the greenback is on the backfoot on reduced Turkish contagion fears and sterling is firm into the North American close.

Sterling has been steadier overall in the past few sessions, rounding out a bottom at 1.2661 on bullish daily candles, albeit capped, so far, by the 10-D SMA – a theme that has been seen across other crosses today as the dollar plummets across the board. There has been no fundamental shift, but Trump made further remarks on Friday over the strength of the dollar and the Fed intent on increasing interest rates. Markets got news of these comments today and heard that Trump had complained that Fed chair Powell has not been the easy money Fed chair as he had hoped and that was enough to send the greenback into a spiral.  

His comments today came almost exactly one month from when he last made his preferences for the path of the dollar known when he said he’s “not thrilled” with rate hikes and worried that the work the administration has done will be nullified, criticizing the Federal Reserve for raising interest rates. Indeed, the Federal Reserve has raised rates five times in Trump’s term and Trump made these comments behind closed doors to wealthy Republican donors at a Hamptons fundraiser.  

Domestic risks stay with Brexit

As for domestic news, well, there has been none other than  Brexit headlines where the odds of a no-deal Brexit have been making the rounds and climbing – according to a report from the Institute for Government released overnight. The study, titled Autumn surprises gave some scenarios for the next phase of Brexit and this outlined five possible scenarios that could develop in the run-up to Britain’s scheduled EU departure date in March 2019. However, there were four of those scenarios that concluded with Britain leaving the bloc without a deal. In fact, this Thursday, the UK Government will publish the first in a series of technical notices in preparation of the possibility of a no deal Brexit.  

However, Brexit Secretary, Dominic Raab has said:

“Securing a deal is still by far the most likely outcome, but we want to ensure we clearly set out the steps that people, businesses and public services need to take in the unlikely event that we don’t reach one.”

Meanwhile, the Dominic Raab is set to arrive in Brussels tomorrow and will discuss the future relationship tomorrow and remaining issues on the withdrawal agreement on Wednesday.

GBP/USD levels

While the pair struggles at the 10-D SMA at 1.2790, the outlook remains overall bearish. “We think the broader downtrend is still well-entrenched in this market. The rebound in the pound might only serve to relieve oversold conditions that have accumulated in this market in recent weeks,” analysts at Scotiabankargued earlier.  

However, the Fibonacci level at 1.2918, (50% retracement of the move up from 2016) remains as the key upside target on a break back above the descending trendline support. Then, a break of the channel’s resistance opens 1.3112 as the 50-D SMA. However, the more favoured scenario points to 1.2677 ahead of 1.2589 on the wide as the June 2017 low. 1.1985 is the H&S objective below there.