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GBP/USD Currency Pair Dropped Below 1.2400 Marks - Multiple Factors In Play! 

EagleFX

The GBP/USD pair extended its previous session, losing streak and dropped below 1.2400 level. That was mainly due to the broad-based U.S. dollar strength as traders were seeking out the safe-haven due to the rising number of coronavirus cases in the U.S.. On the other hand, the reason for the decline in the currency pair could also be attributed to the Brexit worries, which tend to undermine the British Pound and contributed to the currency pair declines. At this particular time, the GBP/USD currency pair is currently trading at 1.2406 and consolidating in the range between 1.2398 and 1.2437.

However, the market's risk sentiment getting soured on the day as the US Centers for Disease Control and Prevention (CDC) Director Robert Redfield recently confirmed that the number of actual confirmed cases was ten times bigger than reported cases. The Redfield indicated that approximately 92 to 95 % of the U.S. population was still facing concerns about ever-increasing virus figures. It should be noted that 37,667 new cases with 692 deaths were reported in America on June 25 as per the latest report, which initially weighed on the risk sentiment.

As a result, the broad-based U.S. dollar reported gains on the day backed by the fears of ever-increasing coronavirus cases in most nations. Thus, the gain in the U.S. Dollar becomes a key factor that kept the GBP/USD currency pair under pressure at least for now, Whereas, the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 97.420 at 3:10 AM ET (0710 GMT).

In the U.K. front, the United Kingdom also reported a fresh sharp hike in the coronavirus cases after PM Boris Johnson eased lockdown restrictions. It should be noted that the latest data suggest 149 virus-related deaths. As in result, the opposition parties have exerted pressure on the Tory leaders despite the wide appreciation of the U.K.'s tracking system and efforts to find the vaccine, which also contributed to the pair bearish moves.

At the Brexit front, the declines in the currency pair were further bolstered by the Brexit worries. As U.K.'s Chief Negotiator, David Frost criticized the European push during Thursday while describing the expectations for the key talks starting from Monday. Let me remind you; the Brexit negotiators will meet face to face in Brussels and then London for the very first time since March. However, these coming meetings will be happening to see whether U.K. 7 E.U. can start to make genuine and fast progress towards an agreement.

On the other hand, the earlier gains in the currency pair backed by hopes of a Value Added Tax (VAT) also faded after the Institute for Fiscal Studies (IFS), a leading U.K. think-tank, warned against a temporary cut. Elsewhere, the U.S. warnings to impose tariffs on the EU/UK goods and fears of no Britain-Tokyo deal in the stipulated six weeks also added strength to risk-tone. As a result, the U.S. 10-year Treasury yields extended its earlier losses near 0.68%, while stocks in Asia also printed mild gain at the press.

Looking forward, the pair traders will keep their eyes on the risk catalysts for fresh impetus. Brexit headlines might gain major attention ahead of Monday's talks. Apart from this, the U.S. Michigan Consumer Sentiment Index and Personal Consumption Expenditure and Personal Income details will be key to watch for fresh directions.


Daily Support and Resistance

S1 1.2274

S2 1.2349

S3 1.2386

Pivot Point 1.2425

R1 1.2462

R2 1.2501

R3 1.2577

Technically speaking, the GBP/USD pair is trading in a selling zone at 1.2385 level, holding below an intraday pivot point level of 1.2425. Closing of candles below this level can extend selling until the next support level of 1.2335, while further selling trends can lead the pair towards 1.2235 support. On the 4 hour timeframe, the cable has formed a symmetric triangle pattern, which is likely to be violated soon, and if this happens, the odds of selling will be enormous. Speaking about other technical tools, both the EMA and RSI are in support of selling, hence with that being said, we should be looking for a sell trade below 1.2380 level to target 1.2335 today. Good luck!

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