Looking at the headline GBP/USD currency exchange rate and above daily MT 4 chart, the British pound (GBP) is on the defensive against the almighty U.S. dollar.
Forex traders are reacting to escalating tensions between the United Kingdom and the European Union and both sides are at a standstill and deadlocked with free trade negotiations. Both sides have until 31 December to reach a free trade agreement or the United Kingdom will crash out of the Eurozone.
The latest drama is around the Irish backstop, again, and the draft legislation presented by Britain which seems to blatantly violate international law. This prompted the Eurozone to issue a stern warning to the United Kingdom.
Withdraw the legislation or face sanctions and even court proceedings. This sent the British pound and euro currency (EUR) reeling last week as sentiment switched risk-off
The economic calendar, for Monday, is fairly quiet. The United Kingdom will release inflation report hearings. The Eurozone is releasing monthly industrial production data and the United States is publishing monthly consumer inflation expectations. Canada has no macroeconomic data scheduled to be released.
Daily British Pound Technical Analysis (GBP/USD)
Looking at the above price action chart, the British pound is now trading below the fifty (50) day moving average and challenging the two hundred (200) day moving average. While above the 200 day moving average the bulls still have a chance to reenter the market. The 200 DMA lines up at 1.2740.
A daily close below 1.2740 opens the door to challenge the next downside barrier lining up at 1.2670. This downside level held throughout the month of July. The next layer of technical support lines up at 1.2530 with the downside barrier in play at 1.2480 then coming into focus.
On the upside, the first layer of technical resistance lines up at 1.2890 with the next key upside barrier then lining up at 1.30. The next layer of technical resistance is in play at 1.3050 with 1.3170 then 1.3250 then coming into play.