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Pound In The Crosshairs

Summary

GBPUSD is licking its wounds after a drop to 11-month low of 1.2920 on Monday, having recovered above the 1.2960 area.

The British pound came under an intense pressure from two different fronts. First, the USD index remains firmly within a bullish trend and staged a widespread rally yesterday as the.

Second, the threat of a no-deal Brexit is rising, especially after the UK officials mentioned the increasing probability of a so-called ‘hard” Brexit.

  GBPUSD is licking its wounds after a drop to 11-month low of 1.2920 on Monday, having recovered above the 1.2960 area. Despite the immediate downside pressure has eased somehow, bearish risks for the pair remain, and the general picture in the weekly charts is still ominous.

  The British pound came under an intense pressure from two different fronts. First, the USD index remains firmly within a bullish trend and staged a widespread rally yesterday as the buying interest around the dollar increased amid another escalation of US-China trade tensions. The upside pressure has eased since, but the greenback keeps solid positions, so sterling remains on the defensive.

  Second, the threat of a no-deal Brexit is rising, especially after the UK officials mentioned the increasing probability of a so-called ‘hard” Brexit. As such a divorce scenario has not been fully priced in, there is still a downside risk for the pound from this factor. Against this background, GBBPUSD still looks attractive for selling on rallies. Only above the 20-DMA at 1.31, the downside pressure will ease more substantially.