GBP/USD on the backfoot with Brexit concerns, 1.2110 eyed

Currently, GBP/USD is trading at 1.2347, down -0.39% on the day, having posted a daily high at 1.2437 and low at 1.2335.

GBP/USD is under pressure with a government spokesman that has announced that Article 50 will be triggered on the 29th of this month. This brings the negative implications to the fore for the UK economy while there is huge uncertainty as to how the trade negotiations will go with the EU. At the same time, the UK is looking like an outsider in respect to the anti-populist movements in the rest of Europe with respect to the Dutch and French elections favouring the non-populist parties. 

EUR/GBP bid on political sentiment, but watch for pull-backs while below 0.8800

Kit Juckes, an economist at Societe Generale explained that EUR/GBP is one of their preferred ways of trading Euro longs, though it has run into selling at 0.88 twice now in 2017. "UK data this week will see CPI on Tuesday with inflation probably rising to 2.1% and retail sales on Thursday, expected to show am 0.8% m/m fall ex-auto fuel. The retail sales data are volatile and have been far stronger than expected but if we start seeing evidence of a squeeze on real incomes bearing down on retail sales volumes, that would be a clear negative for sterling."

US dollar outlook: headed to below 100 before rebounding - Westpac

In respect to the dollar, there is a technical correction that has taken place and the market has tested the 100.00 level at the start of the week while some analysts expect 99.00 to come under pressure before a rebound in months ahead. The dovish hike from the Fed was the trigger, but bearish opinions post the mixed nonfarm payrolls result rang alarm bells as well. There were concerns over the lacklustre wages and poor quality of jobs while pure demographics remain a concern for the prospects of the US productivity and momentum in the economic recovery. As such, sterling's downside may be limited.

GBP/USD levels

The 100-day MA at 1.2413 came under pressure earlier and gave way to a high of 1.2436 before supply came on. The sudden sell-off has conflicted with bullish cross-over between the 20 sma and 200 4hr ema's where the 200 ema currently supports at 1.2342. "The recent low at 1.2110 is considered to be the last defence for the 1.1988 January low and the bottom of the 5-month range at 1.1919," explained analysts at Commerzbank who explained, on the flip side, that if above 1.2376, the next key resistance is 1.2581 (9th Feb high).