GBP/USD tanked on Tuesday as markets believe terror attacks in Brussels after multiple attacks in Paris in last one year would force Britons to actively consider voting in favor of Brexit at June 23 referendum. Prices drifted lower from 1.44 to a low of 1.4190. A minor recovery to 1.4227 was seen in the overnight trade, but fresh offers made sure the pair fell back below 1.42 in early European trade today.
On economic front, a slower-than-expected rise in the UK CPI means BOE has enough room to keep rates at record lows. Moreover, markets see a higher possibility of a rate cut in 2016 than a rate hike.
The data docket is empty today; hence the pair is at the mercy of the overall market sentiment, which is not in favor of the British Pound.
Technicals – Support at 1.4140
Sterling’s failure to capitalize on the bullish break from the symmetrical triangle seen on the daily chart, followed by a break below 50-DMA, coupled with daily RSI, now trading below 50.00, indicates the currency is more likely to extend the drop today to 1.4140 (symmetrical triangle/rising trend line support).
If the rising trend line is defended, the pair could move back to 1.42. A subsequent rally if results in a break above 50-DMA seen today at 1.4277 would shift risk in favor of a rise to 1.45 handle.
Conversely, bullish invalidation is seen only if the spot breaks below 1.4140 today on daily closing basis. Moreover, a break below 1.4140 on daily closing basis could also see RSI suffer a bearish break from rising trend line.
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