GBP/USD Daily Forecast – The Sell-Off Continues

GBP/USD Video 09.09.20.

British Pound Remains Under Serious Pressure

GBP/USD declined below 1.3000 as British pound remained under significant pressure due to fears of hard Brexit.

Brexit has been the main topic for GBP/USD since the beginning of this week.  UK set a deadline of October 15 for the trade deal with the EU and noted that it was ready to leave without any deal.

Then, a report indicated that UK was ready to make changes to Brexit Withdrawal Agreement, prompting negative reaction from EU.

In the latest development on this front, Northern Ireland minister Brandon Lewis stated that the proposed changes would break the international law in a limited way.

Not surprisingly, the prospect of breaking the international law weighed on the pound. At this point, it looks like risks of hard Brexit increase day by day, and GBP/USD trading dynamics will heavily depend on Brexit-related news flow in the upcoming trading sessions.

Meanwhile, the U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, is trying to settle above the nearest resistance near 93.50.

If this attempt is successful, the U.S. dollar will gain more upside momentum and continue its rebound which would be bearish for GBP/USD.

Technical Analysis

GBP/USD managed to get below the support at 1.2980 and continues to move lower. Interestingly, RSI is still in the moderate territory despite the sell-off so there is plenty of room to gain more downside momentum in case the right catalysts emerge.

The next support for GBP/USD is located at 1.2880. In case GBP/USD manages to settle below this level, it will head towards the next support level at 1.2815.

On the upside, GBP/USD needs to get above the previous support level at 1.2980 to have a chance to stop the current downside momentum. If this happens, GBP/USD will head towards the resistance at the 50 EMA at 1.3035.

A move above the 50 EMA will lead to increased upside momentum, pushing GBP/USD towards the next material resistance level at 1.3110.

For a look at all of today’s economic events, check out our economic calendar.