GBP/USD Forecast: Trump’s attack on Brexit strategy kills the support for Sterling

  • The US President Trump says the UK Prime Minister killed the option to deal with the US opting for hard Brexit strategy.
  • GBP/USD broke from the upward sloping trend and targets 1.3100 before returning back to lows around 1.3000.

Sterling is pressed towards 1.3100 level after comments from the US President Trump about the UK Prime Minister Theresa May shutting the door in dealing with the US while opting for the hard Brexit strategy with the EU.

“If they do a deal like that, we would be dealing with the European Union instead of dealing with the UK, so it will probably kill the deal,” Trump is quoted to say in the exclusive interview with the Sun while visiting the UK.

The GBP/USD rose to a 2-week high of 1.3363 on Monday as the UK Prime Minister Theresa May quickly fixed Brexit minister David Davis ’s resignation that appeased the markets. The foreign minister Boris Johnson’s resignation later on Monday cut the prospects back.

The number of Sterling short contracts increased last week by more than 7K to 28.78K according to CFTC report from last week. 

In terms of fundamental, neither the UK government's Brexit white paper, not US inflation affected the market strongly as numbers and the report met the market expectations.

Technically, the GBP/USD broke from the upward sloping channel on the downside and it is heading lower towards 1.3100. The technical oscillators are all pointing downwards with the Relative Strength Index entering the oversold territory and the Slow Stochastics being suppressed in the oversold zone.  On the downside, the short-term support is around 1.3100 and any break below seen targeting 1.3045-1.3000.

GBP/USD 1-hour chart

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