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GBP/USD Violated Upward Channel - Brace for Selling! 

EagleFX

The GBP/USD closed at 1.31618 after placing a high of 1.32659 and a low of 1.31401. Overall the movement of the GBP/USD pair remained bearish throughout the day. After being steady on Friday, the GBP/USD pair fell on Monday and extended its bearish movement. The pair fell to 8th day lowest level on the back of no-deal Brexit worries. Furthermore, the fading risk sentiment also added to the losses of risk perceived British Pound.

The latest sharp decline in the Sterling was caused by the recent update about the new legislation that UK ministers were planning on. According to reports, the new legislation could override a key part of the last year's EU withdrawal agreement.

This move could change the nature of new Northern Ireland customs arrangements planned to avoid a return to checks at the border with the Irish Republic. According to Downing Street, this was a standby plan in case EU-UK trade talks fail. Prime Minister Boris Johnson said that if no deal is reached by the end of October 15, both sides will move on, which would still be a good outcome.

However, in response to the new legislation, the EU chief negotiator Michel Barnier warned that the UK must abide by the Brexit deal's terms that it agreed last year.

This report has escalated tensions between the UK and EU as post-Brexit trade negotiations enter the eighth round this week. According to EU diplomats, if the UK would not abide by both nations' withdrawal agreement, then the EU would have to take legal measures against it.

The British Pound came in fresh selling pressure after these tensions rose in the market, and the pair GBP/USD suffered on Monday. On the other hand, there was a Labor Day holiday in the United States that kept the American traders out of the market, and hence the downfall in GBP/USD pair remain limited.

On the data front, the Halifax Housing Price Index in August rose to 1.6% from the expected 1.0% and against the previous 1.7% and supported GBP that kept a check on additional GBP/USD pair losses on Monday. Meanwhile, the US dollar was steady on Monday as the US Dollar Index remained in a confined range near 93.2 level and failed to impact GBP/USD pair prices. However, the US dollar stance was bearish after the dovish comments from Jerome Powell on Friday that monetary policy will remain on the loose side for a longer period of time.

On Tuesday, at 04:01 GMT, the BRC Retail Sales Monitor for the year is expected to come in as 3.5% against the previous 4.3%, and traders will find fresh clues about the pair movement from it. The NFIB Small Business index from the US and Economic Optimism will also provide direction regarding the pair's movement.


Daily Technical Levels

Support Resistance

1.3109 1.3254

1.3052 1.3342

1.2964 1.3398

Pivot point: 1.3197

The GBP/USD pair is trading with selling bias at 1.3150 level, having violated the support level of 1.3200 level that's extended by an upward channel. Well, now this channel is violated, and we may see GBP/USD prices heading lower towards 1.3055 support level. The RSI and 50 EMA are in support of selling. Resistance stays at 1.3200 and 1.3150 level; therefore, taking a sell trade below 1.3150 level seems to be a good idea. Good luck!

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