GBP/USD succumbs to political uncertainty, dips below 1.31

The pound is being offered today on reports that the rebel Tory MPs are just eight votes short of ousting PM Theresa May.

As of writing, the GBP/USD pair is trading at 1.3097; down 0.70 percent on the day. The pair has also breached the 100-day MA support of 1.3109.

The political uncertainty is overshadowing the stronger industrial production and trade balance released on Friday. Also, weakness in the treasury yield is being ignored as well. As of writing, the 10-yr treasury yield is down more than one basis point. More importantly, it failed to take out critical resistance of 2.4 percent earlier today.

The Pound could remain on the back foot during the rest of the day, courtesy of political uncertainty. Still, aggressive bears need to observe caution as the 10-year treasury yield has failed to take out 2.4 percent. The week ahead promises to be a big one for Sterling with labor, inflation and retail sales reports scheduled for release.  

GBP/USD Technical Levels

Haresh Menghani, Editor and Analyst at FXStreet writes-

"Technically, the pair failed just ahead of the 50-day SMA and retreated sharply from a short-term ascending trend-channel hurdle, albeit has managed to defend the channel support. A decisive break through the trend-channel support, currently near the 1.3100 handle, is likely to accelerate the fall towards Nov. daily closing lows support near the 1.3060 region. The downside could further get extended towards a short-term descending trend-line support near the key 1.30 psychological mark.

On the flip side, any recovery attempts might now confront fresh supply near the 1.3145-50 region, above which a bout of short-covering could lift the pair back above the 1.3200 handle towards retesting the 1.3220-25 heavy supply zone. The mentioned barrier also coincides with the short-term ascending trend-channel resistance and hence, might continue to keep a lid on any further up-move for the major."