The GBP/USD pair fell to 1.3925 levels in Europe; lowest since March 2009. The offered tone is mainly due to the Brexit fears. Investors continue to get scared out of Sterling positions even though we have not had any fresh Brexit related news flow. Moreover, warning shots fired by major ratings agencies on Monday are hurting sterling big time.

Double blow for Sterling

The sell-off could continue not only because of Brexit fears, but also due to the risk-off in the equities. The oil driven risk-off and Brexit fears is a sort of double blow for Sterling; more so because both can lead to delay in the BOE rate hike/or may actually force BOE to cut rates. To top it, a strong non-farm payrolls figure in the US next week could push up US rate hike bets and further add to the bearish pressure on Sterling.

Apart from being oversold on technical charts, there is nothing out there that can help sterling.

Technicals – Falling channel on 15-min chart, strong support at 1.3924

15-min chart
GBPUSD 15 minutes
  • The 15-min chart shows the pair is flirting with the falling channel support at 1.3921.
  • A break lower would open doors for a slide to 1.3840. However, the hourly RSI is oversold, which could trigger a minor technical correction to 1.40 levels.
Monthly Chart
GBPUSD Monthly
  • Monthly chart shows strong support at 1.3924 (76.4% Fibo expansion of July 2014 high-April 2015 low-June 2015 high).
  • Trend line support seen around 1.3955 has been breached for now.
  • However, a technical correction could gather pace if the spot bounced off 1.3924 and secures an hourly closing above 1.3955 levels.
  • On the other hand, a daily close below 1.3924 would increase the odds of a Brexit related slide to 1.3654 (Mar 2009 low). 

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