GBPUSD drops on Brexit worries

Two days of negotiations left before EU Leaders Summit, GBP under pressure: Chart

Brexit 2

The US Dollar was bullish against all of its major pairs on Tuesday. On the US economic data front, the National Federation of Independent Business's Small Business Optimism Index jumped to 104.0 on month in September (100.9 expected), from 100.2 in August. Finally, the Consumer Price Index increased 0.2% on month in September (as expected), compared to +0.4% in August. 

On Wednesday, the Mortgage Bankers Association's Mortgage Applications data for the week ending October 9th is expected. The Producer Price Index Final Demand for September is expected rise 0.2% on month, compared to +0.3% in August.  Finally, the Monthly Budget Deficit is expected to contract to 124.0 billion dollars on month, from 200.1 billion dollars in August.    

The Euro was bearish against most of its major pairs with the exception of the AUD, CHF and GBP. In Europe, IMF expects the euro area GDP to contract 8.3% in 2020, compared with a previous -10.2% estimate. For 2021, an expansion of 5.2% is expected, down from the prior forecast of 6%. ZEW survey results of October were released for Germany (current situation at -59.5 vs -60.0, expectations at 56.1 vs 72.0 expected). The German Federal Statistical Office has posted final readings of September CPI at -0.2% on year, as expected. The U.K. Office for National Statistics has reported jobless rate for the three months to August at 4.5% (vs 4.3% expected).

The Australian dollar was bearish against most of its major pairs with the exception of the GBP. 

The Dow Jones Industrial Average fell 157.71pts (-0.55%) to 28679.81 in Tuesday's trading. 

Gold dropped $31.03 (-1.61%) to $1891.74.

WTI Crude Oil rose $0.76 (+1.93%) to $40.19.

Looking at the most active pairs, the GBP/USD dropped 129 pips to 1.2935. Key resistance can be seen at the 1.3085 area. The bias remains bearish on a daily chart as the pair failed to gain momentum after breaking above its 50-day moving average on Monday. Key support rests at 1.2675 with main target of 1.251 on the downside. 



Source: GAIN Capital, TradingView

Happy Trading

More from Forex

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.