The GBP/USD currency pair hit new 3-month low on Thursday following the continuation of the UK government stalemate. The pair dropped to trade at about 1.2821 at around midday, which is the lowest level it has reached since February 17 of this year.
The recent plunge comes shortly after the pair’s latest attempt to a major rally in late April and early this month. The GBP/USD currency pair now appears to be on a downfall with a host of political and Brexit events expected to send it even further.
GBP/USD Fundamentals Overview
Traders appear to be overlooking the UK economic data, which has been impressive lately. In the most recent UK jobs data, unemployment fell to record lows of 3.8% while wage growth continued to stabilize at 3.2%. This is impressive given the current geopolitical circumstances surrounding the UK economy.
With another round of UK Brexit vote scheduled in parliament at the start of June, PM Theresa May is expected to lose her job then. The most likely replacements are reportedly against striking a deal with the EU and this could result in a non-deal Brexit.
Whether this will be good for the Pound Sterling remains to be seen, but signs point towards hard times for the Pound.
GBP/USD Technical Analysis (the 240-min Chart)
From a technical perspective, the GBP/USD currency pair appears to be trading within a descending channel. It seems to have formed after a double-top reversal pattern around the 1.3350 level between February 27 and March 14 of this year.
And given the recent downward movement, the pair has created some interesting opportunities for both the bulls and the bears. The bulls will target profits at around 1.2871 as shown in the 240-min chart above while bears will look to strike at 1.2781.
GBP/USD Technical Analysis (the Daily Chart)
In the daily chart, the double-top reversal is well illustrated, which demonstrates a shift in power between the bulls and the bears. Now the bears have the long-term control but the bulls will hope to capitalize on short-term rebounds.
In summary, while the greenback continues to enjoy moderate economic data, the Pound Sterling has leaned on strong macro data without success.
The geopolitical climate surrounding the UK PM government in parliament and the Brexit uncertainty continue to weigh on the pair. This suggests a potential bearish bias for the foreseeable future.