Pixabay, E. Dichtl
- GBP/USD remained depressed for the fourth consecutive session on Tuesday.
- Worries about the coronavirus benefited the USD’s perceived safe-haven status.
- Tumbling US bond yields might cap USD advance and help limit deeper losses.
Following a brief consolidation earlier this Tuesday, the GBP/USD pair came under some renewed selling pressure and drifted into the negative territory for the fourth consecutive session. The pair dropped to one-week lows, around the key 1.30 psychological mark during the early European session. The fact that the market is still pricing in over a 50% chance of a BoE rate cut on Thursday, coupled with fears of a no-deal Brexit, turned out to be key factors undermining the British pound. Market concerns that Britain might crash out of the European Union revived on Monday following EU chief Brexit negotiator Michel Barnier’s warning that there is still the risk of a cliff-edge Brexit at the end of 2020.
GBP/USD weighed down by a combination of factors
On the other hand, the US dollar was being supported by worries over the deadly coronavirus, though it lacked any strong bullish conviction. The global risk sentiment took a turn for the worse on Tuesday after Japan confirmed a coronavirus case of a person who has not been to Wuhan/China. Meanwhile, Hong Kong suspended personal travel permits from China and heightened anxiety about the economic impact of the outbreak of the virus in China. This was evident from a sharp turnaround in US Treasury bond yields, which might keep a lid on any meaningful USD positive move and help limit deeper losses for the major currency pair, at least for the time being.
There isn’t any major market-moving UK economic data due for release on Tuesday and hence, market participants are now digesting US macro data for some meaningful trading opportunities later during the early North-American session. Orders for durable goods rebounded 2.4% after tumbling 3.1% in the prior month. The consumer confidence index just came in at 131.6 this month, up from 126.5 in December and ahead of the expected 128.
Focus will remain on the upcoming central bank meetings – the FOMC on Wednesday and the highly anticipated BoE policy decision on Thursday.
Short-term technical outlook
From a technical perspective, sustained weakness below 50-day SMA support was seen as a key trigger for bearish traders and behind the pair’s downfall on Tuesday. Currently placed near a short-term ascending trend-line support, extending from November swing lows, some follow-through weakness will confirm a fresh bearish breakdown and accelerate the slide back towards monthly lows support near the 1.2955 region. The downward momentum could further get extended towards testing December swing lows, around the 1.2900-1.2895 area.
On the flip side, any attempted recovery move now seems to confront some fresh supply near the 1.3050 region (50-DMA), above which a bout of short-covering might assist the pair to make a fresh attempt towards reclaiming the 1.3100 round-figure mark. Sustained strength above the mentioned handle has the potential to lift the pair further towards the 1.3140 horizontal resistance en-route last Friday’s swing high, around the 1.3170 region, and the 1.3200 round-figure mark.
Equities Contributor: FXStreet
Source: Equities News