- GBP/USD witnessed some intraday selling on Friday amid growing fears of a no-deal Brexit.
- Dovish comments by BoE’s Saunders further contributed to the sterling’s intraday downfall.
- Persistent Brexit-related uncertainties might have already shifted the bias in favour of bears.
The GBP/USD pair failed to capitalize on its intraday positive move to levels beyond the 1.3300 mark and witnessed a sharp turnaround on Friday. Renewed concerns about a no-deal Brexit kept a lid on the early uptick, instead prompted some fresh selling at higher levels. Adding to this, dovish comments by the BoE MPC member Michael Saunders took its toll on the British pound. Saunders said that the UK central bank will probably add to their already unprecedented emergency support measures in the coming months to achieve a sustained return of inflation.
This coupled with a modest pickup in the US dollar demand further contributed to the pair's downfall of over 140 pips. The greenback was well supported by a strong pickup in the US Treasury bond yields and retained its bid tone following the release of the US monthly jobs report, which showed that the unemployment rate dropped more than anticipated to 8.4% in August from 10.2% previous. Additional details revealed that the US economy added 1.371 million jobs in August as compared to 1.4 million anticipated and the previous month's 1.734 million.
However, doubts over the sustainability of the US economic recovery held the USD bulls from placing any aggressive bets. This, in turn, assisted the pair to attract some dip-buying and recover around 100 pips from the daily swing lows, near the 1.3175 region. The attempted recovery move lacked any strong follow-through and the pair met with some fresh supply on the first day of the new trading week amid increasing risks of a no-deal Brexit. UK Brexit negotiator David Frost said on Sunday Britain was not scared of a no-deal exit at the end of the year.
Separately, the Telegraph reported that UK Prime Minister Boris Johnson has set a deadline of October 15 to strike a free-trade deal with the European Union. The report further added that if there is no breakthrough in the Brexit deal by then, Britain will accept no deal and move on. Despite the negative developments, the pair, so far, has managed to hold just above the 1.3200 mark. Given that the US markets are closed in observance of Labor Day, the incoming Brexit-related will play a key role in influencing the GBP price dynamics and produce some meaningful trading opportunities.
Short-term technical outlook
From a technical perspective, the near-term bias might have already shifted back in favour of bearish traders. A subsequent slide below Friday's swing low, around the 1.3165 region, will reaffirm the negative bias and turn the pair vulnerable to break below the 1.3100 round-figure mark. The momentum could further get extended towards 1.3050-40 strong horizontal support.
On the flip side, the 1.3265-75 horizontal zone again becomes immediate strong resistance and is followed by the 1.3300 mark. Only a sustained move beyond the mentioned barriers will negate the bearish outlook and lift the pair back towards the 1.3400 mark. Some follow-through buying should assist bulls to make a fresh attempt to reclaim the key 1.3500 psychological mark.
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