- GBP/USD has been trading in a narrower range as markets are somewhat calmer.
- Tensions between the UK and the EU have intensified around Brexit.
- Wednesday's four-hour chart is showing GBP/USD is trading within an uptrend channel.
"The EU must appreciate that we are leaving on October 31st, deal or no deal." These words by Michael Gove – the minister responsible for Brexit preparations – reflect the intensifying tensions between the UK and the EU and weigh on GBP/USD. PM Boris Johnson's government has reiterated its rejection of the thorny Irish backstop while the bloc says it cannot be dropped.
Moreover, fears of a hard Brexit are growing as Dominic Cummings – Johnson's de-facto chief of staff and the mastermind of the Vote Leave campaign – is reportedly pushing to bypass parliament in order to ram through a no-deal exit.
Parliament returns from the summer break on September 3rd and the clock is ticking toward the Brexit deadline – October 31st.
US-Sino trade tensions remain prevalent as well. China has fixed its yuan at a lower level once again – with USD/CNY just below 7.00 – the politically sensitive line. Volatility remains high in stock markets which have recovered on Tuesday after plunging on Monday. The US dollar – which has lost ground on expectations for the Federal Reserve to cut rates – has stabilized. The Fed may not rush to slash rates and remains dependent on the data.
James Bullard, President of the Saint Louis branch of the Federal Reserve, has said that the bank should refrain from responding to every tit-for-tat move in the trade war. Bullard is usually a proponent of cutting rates and his hesitations have boosted the greenback.
A light economic calendar implies further Brexit and trade developments will likely move GBP/USD.
GBP/USD Technical Analysis
Cable has been trading within an uptrend channel since hitting a new 2019 low of 1.2075 last week. At the time of writing, GBP/USD is leaning lower and risks falling below support. The pair is capped by the 50 Simple Moving Average but enjoys some upside momentum. The broad picture is positive but may flip if it falls off the channel.
Support awaits at 1.2130 which provided support earlier in the week and currently coincides with the uptrend support line. The 2019 trough of 1.2075 is critical. Next, we find 1.1985 and 1.1866.
Some resistance awaits at 1.2210 which is the weekly high. The post-crash recovery of 1.2250 is the next line to watch. Further up, 1.2380 and 1.2420 await GBP/USD.
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.
Recommended Content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.