GBPUSD: Sterling Dives as Brexit Pessimism spreads

06 / 08 / 2018
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The pound declined on Monday and was trading 0.55% weaker during the London session as traders sold-off sterling heavily again. The GBPUSD pair was hovering slightly above 1.29, which are levels unseen since September 2017.

Earlier in the day,  the UK International Trade minister Liam Fox said that a no-deal Brexit has a 60% chance of happening, which deteriorated sentiment notably and sterling dived afterward. The Brexit is scheduled to happen after March 2019 and so far there have not been any major agreements or new trade deals between the EU and UK.

The greenback was trading higher against other major currencies as traders digested Friday’s US labor market data. The US economy created 157,000 new jobs in July, down from upwardly revised 248,000 in June. The unemployment rate slid to 3.9% and the year-on-year wage growth remained at 2.7%. These numbers are consistent with another 2 rate hikes in 2018.

The GBPUSD pair has been trading in a bearish channel in the previous weeks, with the lower support line currently around 1.2880. Should this level fall, further decline toward 1.2880 could occur quickly.

However, there is a big bullish divergence on the daily chart and therefore this support might push the price higher, targeting the psychological level of 1.30 and afterward 1.3080, where the upper resistance line of the bearish channel lies.

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