GBP/USD reverses sharply to test 1.2700 on pre-Brexit deal jitters

Dhwani Mehta FXStreet

The pound came under aggressive selling pressure over the last hour, knocking-off GBP/USD back below 1.2700 levels.

GBP/USD: 1.2630 back on sight?

The major reversed course and fell sharply from the support-turned resistance of 1.2770 levels, after the GBP sellers returned to markets, with UK political uncertainty still looming amid latest headlines from the UK’s Brexit minister Davis and Democratic Unionist Party (DUP) leader Arlene Foster.

A renewed risk-off wave gripped markets after Brexit minister Davis confirmed that Brexit negotiations will start next week, weighing heavily on the risk currency GBP.

Moreover, stalled selling seen in the greenback against its major peers also collaborated to the renewed downside in the spot. Meanwhile, latest report from the US ratings agency Moody’s on the impact of the UK election outcome, further dented the sentiment around cable.

Looking ahead, any pullbacks could be considered a good selling opportunity in GBP/USD, in the wake of pre-Brexit deal jitters, while traders brace for the US and UK macro data due later this week. More so, a rate hike combined with a hawkish stance from the Fed could exacerbate the pain in GBP/USD.

GBP/USD Levels to consider

Karen Jones, Analyst at Commerzbank noted: “GBP/USD is negative very near term. GBP/USD sold off sharply after the UK general election last week. The market broke down from the 1.2775-1.3060 range and this is now expected to act as formidable nearby resistance. The intraday Elliott wave count is suggesting that we will see a retracement into the 1.2800/40 band ahead of losses. We look for losses to extend to the 200 day ma at 1.2575 and then the 1.2468/61.8% retracement. There is potential for the 1.2366 the 10th April low.”

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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