GBP/USD Daily Price Forecast – GBP/USD Off to Subdued Start on Re-emerging Brexit Concerns

The GBP/USD fell more than 200 pips to a low of 1.3055 on Friday after PM Theresa May said the Brexit negotiations have reached a standstill. The sharp decline ended up creating a gravestone doji on the weekly chart – a candlestick pattern which indicates that last week began with optimism but ended on a pessimistic note. Essentially, the gravestone doji is signaling bullish exhaustion. The bears may feel emboldened if the pair finds acceptance under the last week’s low of 1.3055, while a move above 1.3277 (last week’s high) would strengthen the bull grip. That said, Brexit news flow will likely decide which way the Pound will go. The snap election plans came to light over the weekend, courtesy of Brexit deadlock, however, UK Secretary Dominic Raab has ruled out November snap election. As of writing this article, GBP/USD is trading near flat at 1.3077 up 0.06% on the day.

Brexit tensions deflate the GBP Ahead of US Fed Rate Update Which Could Give Pound Bears Further Momentum

Meanwhile, the EU leaders, at an informal summit in Salzburg, also rejected the UK government’s post-Brexit proposal and further raised possibility of a “no deal” Brexit. The latest developments largely negated last week’s upbeat UK economic data – consumer inflation and monthly retail sales figures and prompted some aggressive selling around the Sterling. The GBP/USD pair failed to preserve its gains from earlier in the week to the 1.3300 neighborhood, or over two-month tops and tumbled to fresh weekly lows, around mid-1.3000s. The pair now seems to have entered a bearish consolidation phase and was seen oscillating in a narrow trading range through the early hours of Asian session on Monday. In absence of any major market moving economic releases, either from the UK or from the US, the incoming Brexit-related news/developments might continue to act as an exclusive driver of the pair’s momentum at the start of a new trading week.

Meanwhile China’s decision to call of trade talks with US has created a risk averse situation in global markets.  This risk averse situation has created demand for safe haven instruments and this has resulted in demand for USD rising in global markets. While macro calendar remains silent in US for the day,  UK market will see release of September CBI industrial trends survey data, scheduled for release at 10:00 GMT. From a technical perspective, Friday’s intraday sharp fall of over 200-pips and a formation of a gravestone Doji candlestick pattern on the weekly chart clearly indicated that the near-term positive momentum might have already run out of steam. Further downside could be on the cards this week for the GBP/USD as markets head into another showing by the US Fed, which is expected to hike up interest rates in an effort to stave off rising inflation within the US domestic economy. Expected support and resistance for the pair are at 1.3055, 1.3000, 1.2979 and 1.3100, 1.3150, 1.3190 respectively.