GBP/USD falls to 3-week lows on stronger US dollar

Cable breaks 3-day range and tumbles, resuming the downside.
DXY heads for the highest close since December 17.

Matías Salord FXStreet

The GBP/USD pair dropped further during the US session as the greenback extended its rally across the board. Cable bottomed at 1.2843, hitting a 3-week low.

As of writing trades at 1.2855/60, about to post the lowest close since mid-January. After consolidating during three days, the pair broke to the downside, resuming the move that started two weeks ago from levels on top of 1.3200.

The main driver was US dollar’s strength. The Dollar Index rose above 97.00, to the highest since December. It is on its way to the eighth daily gain in-a-row. Higher US yields supported the greenback.

The pound was hit by the prevailing Brexit uncertainty and weak data released today. UK GDP December numbers were particularly weak. The economy grew at a 0.2% rate during the fourth quarter, affected by construction, net trade and investment. Another negative detail was the fourth quarterly decline in business investment.

Regarding Brexit, the government said it is not considering a customs union with the European Union. On Tuesday, PM May will deliver a statement to MP (initially scheduled for Wednesday) while Brexit Secretary Barclay will meet EU Chief Negotiation Barnier.

“It remains our central view that a deal will be stuck between the UK and the EU pushing a hard Brexit off the table. During the ensuing transition phase that would follow a soft Brexit, negotiations would then turn towards the future trade relationship. This implies that any initial GBP rally would likely be dampened by continued political wrangling”, said Rabobank analysts.

In the US, the main attention continues to be on another potential government shutdown on Friday and the ongoing trade talks between China and the US.

GBP/USD

Overview:
    Today Last Price: 1.2855
    Today Daily change: -0.0080 pips
    Today Daily change %: -0.62%
    Today Daily Open: 1.2935
Trends:
    Daily SMA20: 1.3002
    Daily SMA50: 1.2812
    Daily SMA100: 1.2891
    Daily SMA200: 1.3024
Levels:
    Previous Daily High: 1.2976
    Previous Daily Low: 1.2921
    Previous Weekly High: 1.3103
    Previous Weekly Low: 1.2854
    Previous Monthly High: 1.3214
    Previous Monthly Low: 1.2438
    Daily Fibonacci 38.2%: 1.2942
    Daily Fibonacci 61.8%: 1.2955
    Daily Pivot Point S1: 1.2912
    Daily Pivot Point S2: 1.2889
    Daily Pivot Point S3: 1.2856
    Daily Pivot Point R1: 1.2967
    Daily Pivot Point R2: 1.3
    Daily Pivot Point R3: 1.3023

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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