• GBP/USD has been extending its massive sell-off, falling to 29-month lows.
  • Boris Johnson's refusal to meet his European peers is weighing heavily.
  • Tuesday's daily chart is pointing to oversold conditions, implying a bounce.

When it rains, it pours – GBP/USD has lost over 250 pips in less than two days of trading – a rare feat in currency markets. UK PM Boris Johnson is behind the move with his drive toward a hard Brexit. The new PM – less than a week in the job – is refusing to meet his European counterparts unless they agree to reopen the Brexit Withdrawal Agreement.

The Europeans are unimpressed. Fresh reports suggest EU leaders are "ready to call Boris Johnson's bluff" and hold a no-deal summit on October 17th – two weeks before the October 31st deadline.

If nothing changes by Halloween, the UK will crash out of the bloc without an accord, potentially causing massive economic disruption. While some analysts have suggested that all of the colorful PM's actions are part of an upcoming election campaign, investors have hit the panic button.

Johnson's approach to talks follows on his previous actions. On his first in the office, he nominated hardline Brexiteers to senior positions in his cabinet and set up three committees to prepare for a hard Brexit. One of these committees is led by Michael Gove, who said that the prospects of leaving without an accord are "very real." While Johnson rejected Gove's claims on Monday, his unwillingness to speak to leaders across the channel weighs heavily. 

Scotland's First Minister Nicola Sturgeon has said that the "Dangerous UK government" is intent on forcing a no-deal Brexit after meeting the Johnson – echoing market worries. He will travel to Wales today and his public statements will be followed closely. Will he offer a more nuanced or balanced approach? Markets will be scrutinizing every word.

Elsewhere, global traders are awaiting the all-important Federal Reserve decision on Wednesday. The baseline scenario is for the Fed to cut interest rates for the first time since the crisis but signal that no further moves are due soon. Nevertheless, uncertainty remains high.

See Fed Preview: The currencies to trade in each of these four scenarios

The bank's preferred measure of inflation – Core Personal Consumption Expenditure (Core PCE) – is due out today and set to tick up from 1.6% to 1.7% in June. The outcome will likely have a minimal effect on the decision. Later on, the Conference Board's Consumer Confidence measure is set to show an upbeat mood among consumers. 

See US Conference Board Consumer Confidence Preview: Happiness is relative or are your relatives happy?

All in all, Brexit and Boris Johnson are in the limelight, with some room for Fed speculation to have its say.

GBP/USD Technical Analysis – Heavily oversold

GBP USD technical daily chart July 30 2019

To get a perspective about the magnitude of the pound's decline, we are zooming out to the daily chart. The Relative Strength Index has dipped below 30 – indicating oversold conditions. Such conditions are already at extreme levels on the four-hour chart.

The RSI implies a bounce, but it is unclear when it may come and far it may go. Downside momentum remains fierce and GBP/USD continues trading below the key 50, 100, and 200-day Simple Moving Averages.

The fresh low of 1.2118 is the initial line of support. It is followed by 1.1985 and 1.1866 which were swing lows in early 2017 and late 2016. 

Some resistance awaits at 1.2225 which is the daily high. It is followed by 1.2305 which served as resistance in early 2017 and then by 1.2380 (Friday's low) and 1.2440 (a previous double bottom).

More GBP/USD Forecast: Three big levels to watch after Brexit-related meltdown

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD jumps above 0.6900 as Aussie Retail Sales surprise positively

AUD/USD jumps above 0.6900 as Aussie Retail Sales surprise positively

AUD/USD is picking up fresh bids, jumping back above 0.6900, as the Australian Retail Sales surprise to the upside with 0.9% in May. The US dollar eases alongside yields amid persisting risk-off mood. Powell eyed. 

AUD/USD News

USD/JPY slips beneath 136.00 on upbeat Japan Retail Trade, softer yields, focus on Fed’s Powell

USD/JPY slips beneath 136.00 on upbeat Japan Retail Trade, softer yields, focus on Fed’s Powell

USD/JPY consolidates weekly gains during Wednesday’s sluggish Asian session, refreshing intraday low around 135.90 by the press time. In doing so, the yen pair snaps a three-day uptrend around a one-week high.

USD/JPY News

Gold eyes further downside towards $1,800, Fed Chair Powell in focus

Gold eyes further downside towards $1,800, Fed Chair Powell in focus

Gold Price remains on the back foot around $1,820, despite the recent bounce off intraday low. In doing so, the yellow metal prints a three-day downtrend as traders await the week’s key data/events amid a sluggish Asian session on Wednesday.

Gold News

Why this move from Shiba Inu price could catch investors off guard?

Why this move from Shiba Inu price could catch investors off guard?

Shiba Inu price prepares for a quick retracement after nearly a week of recovery bounce. While this run-up was impressive, things are likely going to go slow for SHIB as investors continue to book profits.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Majors

Cryptocurrencies

Signatures