Over the weekend news reports were indicating that the current UK Conservative goverment is in hot water and in difficulties. Internal party struggles and problems with handling the Brexit negotiations seem to be at the heart of the trouble. The EU is apperently preparing for a possible collapse of the Brexit talks.
In any case, the Great British Pound (GBP) reacted swiftly to the news and fell strongly at the open of this week’s trading.
What can traders expect from the GBP this week? Time for a closer look.
The negative news for UK seemed to have kicked started strong bearish price action on the intra-day time frames. Price not only opened with a gap but also continued to fall in the first few hours of the Asian session. Price is now approaching the 1.30 round support level.
The bearish momentum eventually broke key support trend lines (dotted blue), although it still has an unbroken horizontal bottom in front of it. Also traders need to be aware that the entire chart remains choppy and corrective when viewing the large sideways zone. A bullish retracement could occur first before price is able to continue with the bearish breakout.
A bullish retracement could face difficulties and a potential bearish reversal at the Fibonacci resistance levels.
The bearish breakout (red arrows) below support (green) remains a tricky situation due to the recent long sideways price movement. The GBP/USD range was turning into a lengthy one and breaking above or below these zones is not easy. Especially if price has strong support (blue) and resistance (orange) trend lines nearby.
Will the bearish breakout occur this week? An important factor in that answer will be today’s daily candle. It will be important for price to have a bearish candle close near the low, which would significantly increase the chances of a bearish breakout tomorrow or later this week.
Summary: GBP is starting to look very bearish due to the recent momentum… but still be careful due to the length of the range zone and rather wait for a confirmation of the breakout first.
Wish you good trading,