GBP/USD analysis: trouble in paradise, expect a gap lower this time

Valeria Bednarik FXStreet

GBP/USD Current price: 1.2969

The Times reported over the weekend that four more UK ministers could resign.
No Brexit deal at sight and the clock keeps ticking.

The GBP/USD pair lost the 1.3000 level to close around 1.2970, in a combination of mixed local data and mounting Brexit tensions. UK's Q3 GDP came as expected, with the economy growing 0.6% in the three months to September according to preliminary estimates, although business investment for the same period fell sharply, down 1.2% against an expected 0.2% advance. Manufacturing and Industrial production were slightly better-than-expected in September, with the first increasing 0.2% and the second flat for the month. The kingdom's deficit shank more-than-expected, to £-2.340B£ from £-4.560B in August. Weighing on Sterling was the resignation of Jo Johnson, the Transport minister and brother of Boris Johnson. The Times reported over the weekend that four more ministers who back remaining in the EU could resign over Brexit tensions. The same newspaper also said that EU had rejected May's plan for an independent mechanism to oversee Britain's departure from any temporary customs arrangement it agrees. There are no data scheduled in the UK for this Monday, but Brexit-related news are likely to keep coming. While the market's reaction has been moderating through time these last few days, the pair could gap lower at the weekly opening given no progress toward a Brexit deal.

Ahead of the weekly opening, the daily chat shows that the pair is currently struggling with a mild bearish 20 DMA, as the Momentum indicator hovers around its mid-line and the RSI extends its decline into negative ground, all of which leans the risk toward the downside without confirming it just yet. In the 4 hours chart, the bearish strength is even clearer, as the 20 SMA gains downward traction over 100 pips above the current level, while the pair settled below a directionless 200 EMA. Technical indicators in this last time-frame hold near oversold readings as the pair closed a handful of pips below its weekly low of 1.2957, now the immediate support.

Support levels: 1.2955 1.2920 1.2880

Resistance levels: 1.3000 1.3040 1.3085

View Live Chart for the GBP/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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