GBP/USD Forecast: Ready for a dead cat bounce as a hard Brexit looms

  • GBP/USD has been recovering from the fresh six-month lows it hit on Friday.
  • Brexit uncertainty looms large over the pound.
  • Monday's four-hour chart points to oversold conditions that imply a bounce – albeit a temporary one.

The pound's vulnerability has been exposed. When the US reported an increase of 224,000 jobs in June – significantly above 160,000 projected – the greenback gained ground across the board. However, some currencies have weathered the storm better than others and Sterling has been on the losing side. GBP/USD fell below 1.2500, the lowest since January. 

While cable has recovered since, but the recovery may be easily labeled as a "dead cat bounce." as troubles loom large over the British economy. Last week's forward-looking purchasing managers' indices by Markit/CIPS have shown that the UK economy has probably contracted in June – opening the door to an outright recession. Mark Carney, Governor of the Bank of England, has also expressed concern by noting a "sea change" in the global economy. 

Moreover, the political landscape has yet to improve. Both Boris Johnson – the leading candidate to become PM – and his rival Jeremy Hunt are open to leaving the European Union without an accord. Markets are gradually pricing that dreaded option in.

These UK placed the pound in a weak spot ahead of the US data. And now, markets await the response from the US Federal Reserve to the upbeat figures. Jerome Powell, Chair of the Federal Reserve, will testify on Capitol Hill on Wednesday and tension is already mounting. 

With few events on the calendar today, politics may set the tone for the rest of the day.

GBP/USD Technical Analysis

GBP USD technical analysis July 8 2019

GBP/USD is suffering from downside momentum and trades below the 50, 100, and 200 Simple Moving Averages. On the other hand, the Relative Strength Index (RSI) on the four-hour chart is below 30 – suffering from oversold conditions – and indicating a bounce.

Initial support awaits at the June low of 1.2505. Friday's six-month trough of 1.2480 is critical support. The 2019 low of 1.2445 is next. 

Resistance awaits at 1.2560, which provided support in early July and then by 1.2605 which capped it around the same time. Next, e find another support-turned-resistance at 1.2660, before the next peak at 1.2740.

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.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD hovering above 1.1050 amid trade concerns, ahead of ECB minutes

EUR/USD is trading above 1.1050, at familiar levels. Doubts that a US-Sino trade deal may be reached are weighing on markets. The Fed's minutes have reaffirmed the wait-and-see mode, and the ECB's minutes are awaited. 


GBP/USD advances above 1.29 as Conservatives remain in the lead

GBP/USD is rising above 1.29 as fresh opinion polls continue showing a solid lead for Prime Minister Boris Johnson's Conservatives. Further political headlines are awaited.


USD/JPY bounces-off 50-DMA but lacks follow-through

USD/JPY has bounced up from the 50-day MA support of 108.28. China's Vice Premier Liu He is cautiously optimistic about the prospects of the US-China trade deal. Related markets, however, are not buying Liu He's optimism, keeping the recovery in check. 


US Dollar Index recedes from tops, back below 98.00

The greenback, when tracked by the US Dollar Index (DXY), is struggling for direction in the proximity of 97.90 on Thursday. FOMC minutes stressed the Fed’s ‘wait-and-see’ stance. Philly Fed index, Claims, Fedspeak next on the docket.

US Dollar Index News

Gold flirting with session lows, around $1470 region

Gold edged lower through the Asian session on Thursday and is currently placed near the lower end of its daily trading range, around the $1470 region.

Gold News

Forex Majors