GBP/USD Daily Fundamental Forecast – October 5, 2016

The overall USD strength seen across the board yesterday did not help the case of the pound in any way. The pound had already been battered on Monday based on the comments from the UK PM May over the weekend regarding the timeline for Brexit and this USD strength which returned yesterday after about a week only made matter worse for the pound.

The last hope for the bulls had been the region around 1.2825 as it was in this region that the Brexit low was registered. The area seemed to be holding for the early part of the day but not for long. As the European session began, the USD strength multiplied and this opened the gates for the bears of this pair. The region through 1.2825 was smashed open as the pair plummeted through 1.2800 and then through the Brexit low of 1.2790. After that, the pair was simply staring at the abyss as the pair reached lows that have not been seen over the past 30 years.

The bulls were clearly outnumbered as the bear train continued through to break 1.2750 as well and reached as far as 1.2718 where the next support region was and this caused a slight bounce in the price though the bounce has not looked anyway healthy so far.

For today, we have the services PMI to be released from the UK but even though the news from the UK has consistently been better than the expected, no one seems to be bothered anymore and any economic news does not seem to have any impact on the bear train. The only salvation could arrive if the NFP turned out to be weak and the USD became caught in a rut but that looks unlikely at this point of time and the damage might have already been done. The arrival of volatility is a welcome change to the markets and it is something that traders have been looking forward to, over the last couple of weeks.

For today, expect some support to be found around 1.2700 and then at around 1.2630 while strong resistance can be expected at around the Brexit lows of 1.2790. Any break above 1.2790 and a close of price above this region could be worth a buy, if that happens and that is a big IF.