GBPUSD: Here’s How British Pound Could Fall to 1.2825

Summary:

The GBPUSD pair could drop to 1.2825 according to analysts at UOB Bank. The pair dropped sharply after Donald Trump canceled stimulus talks.

The GBPUSD pair declined in overnight trading as the market reacted to a statement by Donald Trump to cancel stimulus talks. It is trading at 1.2887, which is lower than last week’s high of 1.3000. In a report earlier today, analysts at UOB expect the pair will drop to 1.2825.

In a statement yesterday, Donald Trump announced that the White House would not continue negotiations with congress on stimulus until after the election. That announcement pushed the US dollar higher and US stocks sharply lower.

The statement came a few hours after Fed chair, Jerome Powell warned that the US economy was at risk if no stimulus comes through. Indeed, many companies like airlines, hotels, and restaurants have warned that they face existential threats without a deal. For example, the biggest airlines have said that they will lay-off more than 30,000 people.

Brexit is also a major issue for the GBPUSD. While talks are ongoing, there is a significant risk that the UK and the EU will not reach an agreement. That agreement is necessary, especially for the UK, which generates most of its income from the European Union. An emerging risk for the talks is France, which has put in place a red line about fisheries. Emmanuel Macron’s government has said that it will not accept any deal if France is denied access to British fishing waters.

GBPUSD technical outlook

The GBPUSD pair dropped sharply yesterday after the announcement by Trump about stimulus. It reached an intraday low of 1.2865, which is the lowest it has been since October 2. On the four-hour chart, the pair is forming what seems like a bearish pennant pattern that is shown in green.

Also, it is below the 25-day and 15-day exponential moving averages. Importantly, the price is along the lower line of ascending channel shown.

Therefore, I suspect that the pair will continue falling as bears attempt to move to the support at 1.2825. On the flip side, a move above 1.2940 will invalidate this trend.