Market Overview

GBP/USD Forecast: Triple Troubles Pound the Pound

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GBP/USD Forecast: Triple Troubles Pound the Pound

GBP/USD is trading below 1.2700 at the wake of the new year.

  • Concerns about Brexit, China, and the government shutdown weigh.
  • The technical picture is mixed for cable.

GBP/USD fell below 1.2700 as 2019 kicks off in earnest. The move reverses an upwards move seen around the holidays, and now its hangover time.

There are three issues weighing on GBP/USD:

1) Chinese slowdown

The Caixin Manufacturing PMI joined the official government measures and fell below expectations. Moreover, it dropped below 50, indicating future contraction in the world's second-largest economy's industrial sector. 

This sends stocks down and the safe-haven greenback higher.

2) US government shutdown

The US government is partially closed for the twelfth consecutive day. President Donald Trump convenes Congressional leaders in an attempt to resolve the issue. He insists on funding for the wall. His Democratic opponents, which are about to take control of the House, are staunchly opposed to it. There are reports that the meeting will include a briefing about the wall, thus diminishing the chances for a compromise.

3) No progress on Brexit

The UK Parliament went off to the holidays without any progress on the Brexit deal. In an address for the new year, PM Theresa May called for unity, but it is still hard to see how she can muster a majority to approve the accord. 

In the meantime, there are further reports about stockpiling in case of a hard Brexit which will leave Britain without any accords with the EU. This storing may be behind the rise in Markit's manufacturing PMI to 54.2, which is above expectations but does not necessarily bode well for the economy.

GBP/USD Technical Analysis

gbp_usd_26-636820211143040364.png

GBP/USD is dipping below the 50 Simple Moving Average on the four-hour chart, after losing the 200 SMA. However, Momentum is still positive. The Relative Strength Index is not going anywhere fast.

Support awaits at 11.2665 after it worked as a stepping stone on the way up in recent days and capped the pair beforehand. 1.2610 worked as support twice in late December. Further down, 1.2530 was a swing low in mid-December. 1.2480 was the low point.

Looking up, 1.2710 capped cable twice in mid-December. 1.2780 was a peak just before Christmas and 1.2810 was a high point in the holiday season.

Posted-In: Brexit China FXStreet GBP/USD U.S. Government ShutdownNews Global Markets

 

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