GBP/USD falls to a low of 1.2771 on the day
Price now is testing the swing region support around 1.2764 to 1.2777. If that gives way, it’ll move towards the 15 November low @ 1.2724. There is reason for buyers to hold on to current levels as Brexit headlines are still up in the air.
There hasn’t been any positive headlines to come ahead of May’s battle in parliament next month but there isn’t any fresh negative headlines that has crept up over the past few days either. That suggests that any decline from here should be a gradual rather than a swift one.
The break seen here looks to be more technical-related than anything else but with key support levels still holding on, it doesn’t look like sellers will follow through with a strong move to the downside. As mentioned before, it’ll be more of a slow and steady drop as traders price in the uncertainty related to May’s inability to win over parliament in a meaningful vote.
Unless something changes in terms of the Brexit landscape, that’s how I see things should play out. As for the break here, as highlighted earlier:
“Although sterling will still continue to trade based on Brexit headlines, from a technical perspective the chart above shows a narrowing wedge being formed. Much like a spring being coiled up, expect a quick jump on either side of a break in the wedge pattern when the time comes.”