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  • GBP/USD reversal from multi-month highs at 1,2813 extends to levels near 1.2500.
  • Brexit uncertainty and a grim economic outlook are hurting the pound.
  • The pound risks to test the 55-day MA at 1.2409 – Credit Suisse.

The pound is accelerating its downtrend on Friday’s US session, extending its reversal from intra-day highs at 1.2653 to prices below 1.2540 from the first time in one week. Brexit uncertainty and the strong COVID-19 impact on UK economy are weighing on the sterling, pulling the pair near 1.2500  area.

Brexit and the UK economic outlook are hurting the pound

Investor’s concerns about the uncertainty surrounding the Brexit process are weighing heavily on the cable as the successive rounds of negotiations fail to deliver any significant progress as time runs out. With the transition period expiring on January 1, 2021, the odds of a no-deal exit from the Union are increasing by the day.

Furthermore, macroeconomic data is starting to show the strong impact of the coronavirus shutdown in the UK. British Gross Domestic Product contracted by a quarter year-on-year in April, according to data released by National Statistics earlier today, which has increased negative pressure on the GBP.

 

GBP/USD risking to test the 55-day average at 1.2409 – Credit Suisse

The pound has lost about 1.75% over the last two days, after retreating from multi-month highs at 1.2823 and, according to the FX analysis team at Credit Suisse it might extend its reversal down to 1.2409, “Support is seen at 1.2535/33 initially – the 38.2% retracement of the rally from mid-May – below which can keep the immediate risk lower with support then seen next at 1.2501 and then 1.2482/79 – the 23.6% retracement of the entire uptrend from the March low. Whilst we think this holds at first, we look for a break below here also to see a test of the 55- day average, currently at 1.2409. With the uptrend from March not far below at 1.2384, we look for better support here.” 

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