GBP/USD pushes lower to 2-month lows on political turmoil
The GBP/USD faced a new selling pressure in the NA session after a recent report by Sky News suggested that the negotiations between the Prime Minister May's Conservatives and the Northern Irish DUP were not proceeding in the way the DUP would have expected. After dropping to its lowest level since the snap election announcement on April 18 at 1.26, the pair recovered some of its losses and is now trading at 1.2620, down 0.9% on the day.
According to an unidentified source in the DUP, the party cannot be taken for granted by British PM May's Conservatives and it urges the British government to give greater focus to negotiations, Sky News reported on Tuesday. However, the selling pressure eased a bit after BBC's political editor tweeted out that May's Conservatives power share deal with DUP is likely to happen on Thursday.
Earlier in the day, the cable was sold aggressively following the dovish comments from the Bank of England Governor Mark Carney. Carney said that it wasn't time for a rate adjustment yet and Brexit would be a big test for the U.K.'s economy.
On the other hand, the greenback remains strong against its rivals on Tuesday, pushing the US Dollar Index to its session high at 97.52. As of writing, the DXY is at 97.50, up 0.28% on the day.
Technical outlook
Now with the 100-DMA at 1.2650 is violated, the pair could target 1.2580 (Fib. 50% retracement of mid-March - mid-May rise), 1.2480 (Fib. 61.8%) and 1.2400 (psychological level). However, the RSI on the daily graph is inching closer to the oversold area, suggesting that the pair could struggle to gather bearish momentum before making a technical correction. On the upside, the former support at 1.2650 (100-DMA) could be seen as the first resistance before 1.2690 (Fib. 38.2%) and 1.2800 (psychological level/20-DMA).
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
