- Summary:
- GBPUSD dropped to its 6-week lows today on concerns that the UK would end up with a hard Brexit. Could the UK construction PMI help the pound find support?
The British pound leads losses against the US dollar as Brexit concerns come into focus. As of this writing, GBPUSD is trading at its six-week lows at 1.2943. The currency pair is already down 0.37% for the day.
As reported by my colleague Nikolas Papas yesterday, the European Commission and the UK began to clash ahead of negotiations. Michael Barnier, Europe’s Chief negotiator, sternly said that Britain needs to ensure that there is no unfair competition if it wants to be granted access to EU markets without tariffs. On the other hand, UK Prime Minister Boris Johnson threatened to abandon talks. According to him, he wants to pursue free trade agreements and does not want the UK to be bound by the EU’s rules.
Consequently, yesterday’s remarks hints that there is a long road of negotiations ahead for the two parties. This raised concerns that a deal may not happen before the December 31, 2020-deadline that Johnson has set. Should this be the case, the UK would end up with a hard-Brexit that could potentially disrupt economic growth.
Perhaps the UK construction PMI report could help GBPUSD find some bids in today’s trading. Due at 9:30 am GMT, the report is expected to print at 48.1. A better-than-expected figure could be bullish for the currency pair as it would suggest improving industry conditions.
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GBPUSD Outlook
On the daily time frame, we can see that GBPUSD has fallen to support around 1.2970. This price coincides with the rising trend line from connecting the lows of September 3 and October 9. It is also where the currency pair constantly found support in January. A close below the trend line, around the 1.2900 handle, would effectively break trend line support. GBPUSD may then fall to the 200 SMA at 1.2690.
On the other hand, if today’s candle closes as a doji or a hammer, it could signal the presence of buyers in the market. GBPUSD may soon trade higher to its January highs around 1.3200.