GBP/USD hits the brakes near 1.2750 on a quiet Monday

The Sterling is stuck in steeply bearish territory as broad risk aversion and Brexit concerns keep the GBP in a weakened state.
A disappointing earnings reading on Tuesday could open up further downside into new one-year lows.

Joshua Gibson FXStreet

The GBP/USD is trading into 1.2750 ahead of Monday's London market session after thin action in the Asian markets saw major pairs close their week-opening gaps before returning to middling on the day's action.

Last week saw a full-scale return of risk aversion as contagion risks from Turkey to banking sectors throughout emerging markets and the European Union, sending traders piling back into the US Dollar as risk flows hit full-reverse.

Monday's economic calendar is devoid of data for the UK, and traders are going to be focused on Brexit headlines for the day as well as the new Turkey developments, though GBP bulls will be keeping an eye turned towards Tuesday's Average Earnings figures for the UK, which drop early in the day at 08:30 GMT, and long position hopefuls will be looking for an improved reading, with Average Earnings excluding bonuses forecast to come in at 2.6% versus the previous 2.7%, and Average Earnings with bonuses expected to remain steady at 2.5%.

GBP/USD levels to watch

Technical indicators are leaning heavily into the bears' favour, despite markets being primed for a bullish pullback, as noted by FXStreet's own Valeria Bednarik: "the pair fell for a third consecutive week and for nine days in-a-row, although there are no signs that indicate downward exhaustion, given that in the daily chart, technical indicators maintain their strong downward slopes, with the RSI currently at 23. The 20 DMA is over 200 pips above the current level, bearish, losing relevance for intraday trading. In the 4 hours chart, the pair also presents a bearish stance, with the 20 SMA heading south around 1.2865, the Momentum indicator consolidating in negative territory after a modest upward correction, and the RSI indicator hovering around 24. The mentioned level is a potential target in the case of a due correction."

Support levels: 1.2720 1.2680 1.2645

Resistance levels: 1.2795 1.2830 1.2865

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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