GBP/USD drops back below 1.3000, after retreating 200 pips from the weekly top

  • Pound ends week under pressure after Jo Johnson resignation and on the back of limited Brexit deal hopes. 
  • Greenback gains momentum after US data and consolidates 2-day rally. 

Cable peaked during the US session at 1.3055 but reversed and drops sharply hitting a fresh daily low at 1.2968. Near the end of the week was hovering around 1.2970/80, at the same level it had a week ago. 

The flat weekly close for GBP/USD takes places after the pair was unable to hold above 1.3100 and following a slide of 200 pips from the weekly top, reached on Wednesday at 1.3173. From a technical perspective, the recent move to the downside signals more losses ahead. Below 1.2960, the next strong support is seen at 1.2930. 

The near-term pressure favors the downside. A recovery back above 1.3100 in the short-term could ease the negative tone. A consolidation above 1.3200 would signal more gains ahead. 

Brexit continues to be the main theme for GBP 

Analysts expect the pound to remain heavy on the back of Brexit negotiations. Bloomberg reported that PM May invited her most senior ministers to read the draft deal, about 300 pages without the Irish border backstop. The main problem for Brexit remains unsolved. “Will we get a deal in November or not? In our view, we think we will have to wait for December and it could even slip into early January. The main obstacle is the Irish border/backstop, as 90-95% of the withdrawal agreement has been agreed”, said analysts at Danske Bank. 

Regarding economic data, next Tuesday in the UK the employment report will be released and on Wednesday inflation data. In the US the economic calendar includes CPI, retail sales and Powell’s testimony. 

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