Market Overview

GBP/USD Forecast: Break Below 50-DMA Opens Further Downside For Sterling

  • GBP/USD trades 0.5 percent lower on Tuesday with Tory party conference likely to produce more Brexit related headlines that weigh on currency. 
  • The UK construction PMI fell short of market expectations to a 6-month low of 52.1 in September but macro data are having little effect on Sterling.
  • The 50-day moving average serves as support with 1.2935being the next target

Sterling is trading down 0.5 percent at around 1.2980 level as the Brexit uncertainty weighs on the currency with the ruling Conservative party conference unable to generate common deal about the Brexit. 

Sterling rose as high as 1.3112 against the US Dollar on Monday on news of the UK planning a compromise on the Irish border issue to a get a Brexit deal. The UK will reportedly accept some checks in the Irish sea to achieve the agreement. It could provide the necessary breakthrough, or at least a significant step further toward an accord ahead of the EU Summit later this month.

Meanwhile, the UK construction PMI decelerated to 52.1, the lowest level in the last six months. On Monday this week, the UK manufacturing PMI saw the activity rising more than expected to mark a reading of 53.8 in September after decelerating unexpectedly sharply to 52.6 in August. 

With the GBP/USD falling below 1.3000 level, the currency pair is now facing a key technical support at 1.2980 representing 50-day moving average on a daily chart. The GBP/USD is still moving in the corrective move lower-to-sidelines after bouncing off the cyclical low of 1.2662 in the middle of August. The technical correction saw the uptrend peaking just below 1.3300 and the combination of political uncertainty and the unconvincing macro data saw GBP sliding below 1.3080 representing 23.6 percent Fibonacci retracement of the downtrend from 2018 high of 1.4377 to 1.2662 this year’s low.  With the key technical oscillators including Momentum and Slow Stochastic pointing downward, the GBP/USD is now trapped within the tight range of 1.2980 and 1.3125 representing 50-day and 100-day moving average on a daily chart. Only the break below 1.2985 level would bring further targets into the spotlight starting with 1.2935 August 22 high and 1.2900 round big figure next. 

GBP/USD daily chart


Posted-In: Brexit FXStreet GBP/USDNews Forex Markets


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