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  • GBP/USD’s reversal from 1.3080 extends to 1.2920 low so far.
  • The pound dives as Brexit negotiations approach their deadline.
  • GBP/USD might drop towards 1.2445 or lower – Commerzbank.

The pound has gone through a sharp sell-off on Tuesday, losing nearly 1% on the day and giving away half of the ground taken last week. Sterling’s pullback from Monday’s high at 1.3080 accelerated on Tuesday after breaking below the 1.3000 area to reach session lows at 1.2920 so far.

Pound dives as hopes of a Brexit agreement fade

The broad-based dollar strength, fuelled by a deteriorated market mood and the lack of progress on the Brexit talks have weighed on the GBP/USD on Tuesday. Previous hopes of reaching an agreement with the UE are starting to fade as the clock ticks towards the October 15 deadline without any relevant progress. 

On the macroeconomic front, the unexpected increment of the ILO unemployment rate in the three months to August has been practically unnoticed. Likewise, the impact of the Bank of England’s moving closer towards negative interest rates or the new COVID-19 restrictions for some Northern regions has been practically nonexistent.

GBP/USD reversal might extend towards 1.2445 – Commerzbank

On the technical level, Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank warns about a sharper GBP decline: “GBP/USD has met its 1.3070 corrective target and we still favour failure here. Should the market fail here as expected, we will assume another leg lower is in the offing and we should see further losses to 1.2445 and then 1.2250/00.”

Key levels to watch