GBP/USD analysis: Bulls losing control amid lack of positive Brexit headlines

The overnight not so encouraging Brexit headlines seemed to undermine the British Pound.
Investors seemed to take some profits off the table ahead of the key central bank meeting.

Haresh Menghani FXStreet

The GBP/USD pair extended the overnight modest retracement slide from multi-week tops and remained depressed for the second consecutive session on Tuesday. The overnight discouraging Brexit headlines undermined the British Pound and seemed to be one of the key factors exerting some pressure through the early European session on Tuesday. It is worth mentioning that Luxembourg Prime Minister Xavier Bettel on Monday reiterated that the European Union won't extend the Brexit deadline "just for the sake of another extension" and further added that the Withdrawal Agreement signed by former PM May is so far the only possible solution.

Absent positive Brexit headlines prompts some profit-taking

Without any convincing signs of a softer Brexit or working towards a Brexit deal, coupled with the fact that the pair had quite a strong run of over 500 pips from sub-1.2000 levels, or multi-year lows set earlier this month, traders seemed inclined to take some profits off the table. Adding to this, the pair's inability to make it through 100-day SMA barrier near the key 1.2500 psychological mark further collaborated to a follow-through technical selling/long-unwinding trade amid absent relevant market-moving economic releases, either from the UK and the US.

Despite the pullback, the pair remained well within Friday's broader trading range and has been showing some resilience below the 1.2400 handle. A subdued US Dollar price action - weighed down by Fed rate cut expectations - helped limit any deeper losses. Meanwhile, opinions over further policy easing by the Fed remain divided, which now seemed to hold investors from placing any aggressive bets and wait for the FOMC decision on Wednesday.

Heading into the key event risk, Wednesday's release of the latest UK consumer inflation figures is likely to have some short-term influence on the Sterling. In the meantime, the incoming Brexit-related news/developments might continue to drive the broader market sentiment surrounding the British Pound and produce some meaningful trading opportunities.

Short-term technical outlook

The pair already seems to have found acceptance below 23.6% Fibo. level of the and is currently challenging 100-hour SMA. This is closely followed by 23.6% Fibo. level support, around the 1.2375 area, and 200-hour SMA near the 1.2360-55 region, which if broken might shift the near-term bias back in favour of bearish traders. A subsequent slide below the mentioned support levels now seems to accelerate the corrective slide further towards the 1.2300 round figure mark, coinciding with 38.2% Fibo. level.

On the flip side, immediate resistance is pegged near the 1.2425-30 region (23.6% Fibo. level), above which bulls are likely to make a fresh attempt towards conquering the 1.2500 round-figure mark. The momentum could further get extended towards the 1.2565 intermediate resistance en-route the 1.2600 handle.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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