All the Forex pairs where GBP is term currency are falling down aggressively including GBP/USD, GBP/CHF and GBP/CAD and many more. We saw the pair endure one of its biggest one-day drops since the Brexit referendum. Elsewhere, the Dollar was sitting on the porch of the 98 handle for the majority of the day, nudging up to a two-month high and printing a low of 97.90. As for US yields, the US 2-year treasury yield drifted sideways between 1.84% and 1.85%, while 10-year yields ranged between 2.05% and 2.07% as the market continued to price ina 30bp of easing at this week’s meeting.
No-deal Brexit risks continue to grow. “Newly installed UK PM Boris Johnson said he would not commence talks with EU leaders until they first agreed to reopen the deal struck with predecessor PM May, and scrapped the backstop guarantee for the Irish border. Senior UK officials also said that ministers were “turbo-charging” no-deal preparations,” analysts at Westpac noted.
Meanwhile, over in Europe, analysts at ANZ Bank noted that EU officials maintained that the deal they struck with Theresa May is not up for negotiation, and the Irish backstop provision won’t be removed. “An opinion poll in Ireland showed that only 43% of the population support Irish PM Varadkar’s position on Brexit and the Northern Ireland backstop.”
As for US data, the Dallas Fed manufacturing index soared back for the month of July to -6.3 from -12.1 although remains well down on the thirteen-year highs hit in mid-2018. Nevertheless, the Federal Reserve decision is likely to have considered the number of positive data releases since its last meeting, with jobs, CPI and GDP all lined up for a positive input for the second half of the year and the risk here is on the consumer. Inflation could run sky-high if the FED acts too aggressive so soon, so a hawkish cut could be on the cards which mean more upside for the Dollar.
By looking at the daily technical chart we can see that pair falling down and heading south side. Overall pair is trading in the downtrend and is making successively lower lows and lower highs with every swing. The pair is falling down continuously from 1.7722 to 1.6070 level. It’s not like bulls did not made any attempt to took the pair upside but the downside flow was too high which vanished all the bullish momentum.
Overall pair is trading and sustaining below the moving average line which is favoring the bears and generating bearish signal on the chart from long term prospective we may see steep downfall which is awaited on the cards.
Intraday bias remains bearish on the pair as long as 1.6500 level remains intact. Odds are in favor of bears. The pair could face the next support at 1.5950 ahead of 1.5800. On the upside, resistances align at 1.6500 and 1.6700. A bearish crossover on MACD indicator is the recent development on the chart which is favoring the bears and providing us bearish signal .RSI arrived in the negative territory i.e. oversold territory.