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GBP/USD Violated Upward Trendline - Broad-Based US Dollar Strength & Hard Brexit Fears!

EagleFX

The GBP/USD currency pair flashing red and dropped to 1.2660 while representing 0.52% losses on the day, mainly due to the broad-based U.S. dollar bullish bias backed by multiple factors. The bearish sentiment could also be attributed to the fears of hard Brexit, which eventually undermined the British Pound and contributed to the decreasing value of the currency pair. At present, the GBP/USD is trading at 1.2677 and consolidates in the range between the 1.2651 - 1.2754. However, the traders are cautious about placing any strong position ahead of important data from the U.K. and the U.S.

It should be noted that the U.S. Federal Reserve showed a willingness to use unconventional monetary policy tools, like Yield Curve Control (YCC). In the meantime, Federal Reserve decided to keep rates near zero, possibly for years to come, which initially sent the U.S. dollar to the lowest since March 10 but failed to keep the U.S. dollar bearish afterward.

However, the reason could be attributed to the pessimistic tone from the U.S. Federal Reserve's policy meeting, which indicates coronavirus could cause longer-lasting damage to the economy, and recovery from the pandemic would take years. As well as, they showed that the U.S. economy would fall 6.5%, while the unemployment rate will be 9.3% by the end of the year, which eventually damaged the investor's confidence about the U.S. recovery.

On the other hand, the U.S. dollar gains were further bolstered by the fresh on-ging tussle between the United States and China. Which eventually fueled the risk-off market sentiment. Whereas, the U.S. Dollar Index that tracks the greenback against a basket of other currencies increased by 0.38% to 96.315 by 12:39 AM ET (5:39 AM GMT).

At the Brexit front, the European Union's (E.U.) chief Brexit negotiator Michel Barnier recently fueled the on-going concerns while giving warning to the U.K. at the European Economic and Social Committee. It should be noted that the E.U. diplomats warned to take back the British status as a regional financial hub. The information appeared from the leaked document that the European Parliament is set to reject such a trade deal between the United Kingdom and European Union that will not be able to maintain fair competition and strong standards on the environment and workers' rights.

On the other hand, the UK PM Boris Johnson showed a willingness to ease more lockdown restriction while Johnson did not give any statement against China yesterday, which kept UK-China tussle on the soft track for now. Furthermore, the trade talks between the U.K. and Japan are going well with NIKKEI saying, "U.K. seeks swift Japan trade deal and TPP membership. This statement initially exerted some bullish impact on the currency pair.


Daily Support and Resistance

S1 1.2577

S2 1.2668

S3 1.2706

Pivot Point 1.2759

R1 1.2797

R2 1.2851

R3 1.2942

The GBP/USD pair has violated the upward channel to trade bearish around 1.2688 level. Closing of candles below this can trigger more selling until the level of 1.2610, while further selling can be seen until 1.2487 if 1.2610 support gets violated. Conversely, the resistance holds around 1.2750 level today. Let's consider taking selling trades below 1.2750 level today. Good luck!

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