GBP/USD headed for a test of the channel's downside support
- GBP/USD looking to a break of the 1.30 handle to the downside.
- A 60‑40 chance of no-deal Brexit - "Britain is odds-on to crash out of the European Union without a deal".
GBP/USD has been subject to a fair bit of supply over the last number of months and it is unlikely that there is going to be much let up according to the fundamental and technical outlook at this stage. GBP/USD remains in a definitive downtrend with rallies capped at the top of the descending resistance. GBP/USD is currently trading at 1.3002 and is on the verge of a break lower having already pierced 1.30 the figure with 1.2999 traded in early Asia so far.
- BoE's Carney: One rate rise a year for the next few years is a good rule of thumb
It's the same old story with the pound, and now that the BoE is out of the way and has clearly signalled to markets that the recent hike was indeed a one-and-done until next year, Brexit uncertainties will continue to dominate the bearish outlook until there is some clarity - which is unlikely to come at any stage of the negotiations soon - and until it becomes clear what kind of Brexit the economy has to endure.
A 60‑40 chance of no-deal Brexit
Over the weekend, the Sunday Times reported that Liam Fox told them that there is a 60‑40 chance of no-deal Brexit:
"Britain is odds-on to crash out of the European Union without a deal", Liam Fox warned today and squarely blaming the “intransigence” of the European Commission. The Sunday Times wrote that Fox accused Eurocrats of harbouring a “theological obsession” with EU rules rather than “economic wellbeing”, which would lead to “only one outcome”.
- BoE Gov Carney: The possibility of a no deal Brexit is uncomfortably high
GBP/USD levels
The descending resistance line has been a strong fading level and meanwhile, the descending support line is located down at 1.2957 - Directly below there comes the Fibonacci support at 1.2918, (50% retracement of the move up from 2016). On a break of the channel's resistance, however, 1.3200 guards the 50-D SMA - this is now located at 1.3213 ahead of 1.3461/80 that comes before the convergence of the 200-D SMA (1.3581).
In the meantime, Valeria Bednarik, chief analyst at FXStreet also explained that the pair is technically bearish, given that in the daily chart, the 20 DMA turned modestly lower while attracting selling interest all through the week:
"The Momentum indicator in the mentioned chart stands flat below its 100 level, but the RSI heads lower, around 36, leaning the scale toward the downside. Shorter term, the downward potential is stronger, as in the 4 hours chart, the pair keeps moving away from a strongly bearish 20 SMA, while technical indicators remain well into the red, with modest downward slopes."