GBP/USD crumbles on cracks in Tory lead and firm US dollar
|- GBP/USD was falling below trendline resistance as UK polls narrow.
- US dollar holds the bid despite firmer Eurozone data.
GBP/USD is off on the day, losing 0.36% at the time of writing having fallen from a high of 1.2903 to a low of 1.2834. GBP/USD has lost ground below the trendline resistance of the uptrend formed on the 22nd November. Brexit headlines are at the core of fundamentals while the US dollar maintains form.
Cracks in Tory lead dents GBP
The latest on the Brexit front is down to the polls with the Tory party leading by 11 points according to a YouGov selection of 1,678 adults. There have been a number of polls in fact and the downside in GBP originated to an earlier opinion that showed a narrowing of the gap between the Conservatives and Labour to only 7% – a large downside variation of a weekend poll which printed a far larger gar of 19% in favour of the Tory party. In fact, for the first time since September, net short GBP positions increased suggesting that confidence could be wavering as the December 12 election nears, as noted by analysts at Rabobank:
"The market has appeared to be betting that the chances of a no-deal Brexit are small. However, these risks could increase again particularly if the trade talks with the EU falter next year."
The analysts went on to say that "if PM Johnson’s Conservatives win a majority on December 12 we see scope for GBP/USD to head towards 1.32 on the expectation that political uncertainty will be reduced. However, given risk that the trade talks with the EU will not be as easy as Johnson has indicated, we see plenty of scope for disappointment in 2020."
US dollar remains firm
Meanwhile, the US dollar remains firm despite gains in German confidence numbers. Federal Reserve Powell spoke in the early Asian session yesterday and delivered a bullish case for the US economy while preserving an optimistic rhetoric over the Fed's current monetary policy stance.
GBP/USD levels
Below trendline resistance, GBP/USD is showing signs of failure at the 200-hour moving average as its test the 21-day moving average. The pair lost its footing at the psychological resistance at 1.3000 which otherwise guards a run to the 200-week moving average at 1.3109, a confluence level where it meets the 50% retracement of the move down from 2018 at 1.3167.
"Near term risk is shifting to the downside and attention is on the 1.2768current November low. Failure at 1.2768 would probably see a slide tothe 200 day ma at 1.2703. This guards the 1.2582 September high. Below 1.2582 lies the 1.2493 uptrend line. It guards 1.2196/94," analysts at Commerzbank argued.
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