- Bulls failed to capitalize on last week’s strong upsurge to over three-month tops.
- Renewed Brexit-related uncertainties exerted some fresh pressure on the Pound.
- A goodish pickup in the USD demand added to the selling bias around the major.
The intraday selling pressure around the British Pound remained unabated through the early European session on Monday and dragged the GBP/USD pair to daily lows, around the 1.2560-55 region in the last hour.
Having faced rejection near the very important 200-day SMA, the pair came under some fresh selling pressure on the first day of a new trading week and eroded a part of Friday’s strong upsurge to the highest level since late-June. Renewed concerns that the UK and European leaders may not reach a deal by October 31 Brexit deadline turned out to be one of the key factors exerting fresh downward pressure on the British Pound.
Brexit optimism showing signs of fading rather quickly
It is worth mentioning that the pair on Friday gained some strong follow-through traction and rallied to levels just above the 1.2700 handle after the European Council President Donald Tusk said that we have received promising signals from Ireland’s Leo Varadkar that there could be a deal on Brexit. Together with Thursday’s best single-day percentage advance since March, the pair posted the best two days of gains in over a decade.
Meanwhile, the optimism seemed to fade rather quickly in reaction to Irish Foreign Minister Simon Coveney’s comments earlier this Monday, saying that a deal is possible but we are still not there yet. Coveney’s remarks suggested prevailing differences between the two sides on the border between Ireland and the UK’s Northern Ireland. Hence, the key focus will remain on the EU leaders meeting on Thursday and Friday to see if a deal is still possible before October 31.
Apart from Brexit-related uncertainties, the pair was further pressurized by a goodish pickup in the US Dollar demand. As investors took a closer look to much-hyped breakthroughs from the crucial high-level US-China trade talks, a slight deterioration in the global risk sentiment seemed to benefit the Greenback’s relative safe-haven status against its British counterpart.
It will now be interesting to see if the pair is able to attract any buying interest at lower levels or continues with its intraday corrective slide amid absent relevant market-moving economic releases and a US holiday in observance of Columbus Day.
Technical levels to watch
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