GBP/USD tumbles below 1.28 the figure as dollar spikes ahead of potential Thanksgiving squaring

GBP/USD met headwinds near 1.2880 after rising from 1.2821 (intra-day low) on reasonably upbeat rhetoric, relative to the apparent risks of the UK crashing out of the EU without a Brexit deal that is. However, the dollar has been on a tear as markets remain in risk-off mode.

Eyes on Xi/Trump and the DXY

The Sino-US trade spat, coupled with EU political angst, (Italy, Brexit et al) and a general concern about the path for Global growth is weighing on sentiment which is once again supporting the greenback. After registering its second biggest one-day drop of November last Friday, and additional weakness on Monday, the DXY has managed to climb back above  96.247 Fibonacci level, a 50 percent retrace of the 94.789 to 97.704 (October to November), and onto a high of 96.86 so far today. However whether the greenback can sustain such a bid as we head into Thanksgiving this Thursday is another matter and positions, profits, are likely to be squared off ahead of the G20 summit on the 26th Nov where Xi and Trump are expected to meet and discuss trade. 

Brexit risk: "A leadership challenge is likely"

Analysts at Danske exlained that it is proving more difficult for the Brexithardliners to secure the 48 'no confidence' letters than they had imagined:

"We still think a leadership challenge is likely, but the difficulties support our view that Theresa May is likely to survive it. With respect to the latter, the DUP chose to abstain from the budget votes last night, which is against the confidence and supply deal between May and the DUP, which indicates that the DUP will support the government on (among other things) the budget and finance bills. The big question we need an answer to is whether this is just a warning shot, or whether the DUP is indeed about to pull its overall support."

GBP/USD levels

GBP/USD is looking into the August and October lows at 1.2705/1.2662 now and bears can target a run below 1.2662 that would trigger further weakness to the 61.8% Fibonacci retracement of the 2016-2018 advance and the June 2017 low at 1.2593/89, analysts at Commerzbank argued:

"Immediate downside pressure will remain in play while the cross stays below the 55 day moving average and November 14 high at 1.3017/72. Further resistance comes in at the 1.3175 current November high below which we will retain a bearish bias."