GBPUSD Drops 300 Pips in 2 Days On Potential No-Deal Brexit; Lockdown Fears

Summary:

The GBPUSD has experienced a steep 300-pip drop in 2 days of trading, as fears of a no-deal Brexit and softer risk tone hit the markets.

The GBP/USD continues to see intense offers, as sellers picked up from where they left off on Thursday after sending the pair down by 0.81%. The cable is now trading at three-week lows around 1.3175, as markets prepare for a no-deal Brexit.

In the meantime, a few cities in the UK report a rise in coronavirus cases. This situation raises the potential for a tightening of existing restrictions. The Mayor of London, Sadiq Khan, is desperate to avoid the lockdown in London being raised to the next tier, and he is calling for urgent action.

The London session on Friday has seen markets displaying a risk-averse tone, strengthening the greenback.

Technical Levels to Watch

The GBP/USD’s cascade to the south escalated this Friday with yet another steep drop by 0.7%.

This move has found support at the junction between the lower channel boundary and the 1.31754 support. A breakdown of this level favours a move towards 1.31019 (30 July high and 12 November low). Further descent brings 1.30554 into the picture and 1.29921 (4 August and 26 October lows).

On the flip side, a bounce from the present levels targets 1.32663, with the possibility of an advance also targeting 1.33193 and 1.34765 (9 December high). Only a break above 1.35134 allows the cable to touch off new 2020 highs.