- Summary:
- GBPUSD ended yesterday's trading unchanged on concerns that the UK will end up with a no-deal Brexit and on the back of disappointing PMI reports.
The British pound traded lower yesterday as market participants worried about Brexit. GBPUSD peaked during the Asian session to an intra-day high of 1.3417. It then steadily traded lower to finish the day at the exact price it where it opened, 1.3331. As of this writing, the currency pair is down close to 40 pips from its open price at 1.3288.
Brexit Concerns Resurface
Yesterday, reports came out that UK Prime Minister Boris Johnson will push for a law that will prevent the UK and EU to extend the transition deadline from December 31, 2020. This was bearish for the pound because lesser time for debates on extensive trade talks raises concerns for a no-deal Brexit.
Disappointing UK PMIs
It also did not help that data from the UK failed to meet market expectations. The services PMI for November printed at 47.4 which was lower than both the 49.1 forecast and October’s reading at 48.9. The manufacturing PMI also missed the 49.6 estimate when it came in at 49.0. Remember that readings below the 50.0 baseline suggests industry contraction.
UK Employment Data Due Today
The claimant count change for November is expected to show that 21,200 people applied for unemployment benefits during the month. Along with this, the unemployment rate is estimated to show a 0.1% uptick from October with the November forecast at 3.9%. Meanwhile, average hourly earnings for the third quarter of 2019 is eyed at 3.4%.
Read our Best Trading Ideas for 2020.
GBPUSD Outlook
Yesterday, I pointed out a rising trend line on the 4-hour time frame of GBPUSD. Now, looking closer at the hourly time frame we see a potential setup for a sell until the currency pair meets support at the rising trend line.
Connecting the highs from December 13 and December 16, GBPUSD has been on a short-term downtrend. This is evidenced by the falling trend line. When you draw the Fibonacci retracement tool from the high of December 16 to today’s low, we see that the area between the 50% and 61.8% Fib levels seems to coincide nicely with the trend line too. Reversal candles around 1.3340 could mean that GBPUSD is on its way to trade lower. You can aim for support around 1.3115 where the rising trend line on the 4-hour time frame seems to be.
On the other hand, a strong bullish close above the Fib levels may mean that there are enough buyers in the market to push GBPUSD back up to its 19-month highs at the 1.3500 handle.