The British pound still looks worried about Brexit complications. As the EU stopped being neutral in late Feb and started talking a cautiously negative way, while the points on the border in Ireland and the transition period still being the same in Brexit draft, the pound continued losing any optimism it might have still got.
Guy Verhofstadt, the EU Brexit coordinator, said last week that the civil rights agreement, another issue in the negotiations, might be arrived to in the following weeks. This helped the pound a bit, but did not stabilize it for the long term, as the market knows very well how quickly the EU may change its mind once the talks arrive to some painful points.
Last week, the pound also reacted to the US dollar price fluctuations. So, the greenback and Brexit are the two things that are forming the GBP trends now.
This is why the pound did not show any notable reaction to the manufacturing production released Friday. The indicator, meanwhile, came at +1.3% MoM, with the forecast at +1.5% MoM, and -1.3% MoM last month. It is quite clear what is sending the manufacturing down: the housing sector lost 3.4% MoM, while the forecast was just 0.4% MoM. All this proves the pound very much depends on Brexit and pays little attention to anything else.
On H4, GBP/USD chart shows a stable descending trend with slightly lower highs near the resistance and new lows without support testing. After the current downtrend support has been tested,a reversal may well occur. Meanwhile, a local downtrend is forming, with the resistance at 1.3883. In case the price bounces off this resistance, it may fall to the support at 1.3733. Once broken out, the price may fall further to 1.3560. Conversely, if the resistance at 1.3895 gets broken out, the descending trend may revert, with the new target at around 1.4100.
By Dmitriy Gurkovskiy, Chief Analyst at RoboForex
Any predictions contained herein are based on the authors’ particular opinion. This analysis may not be treated as trading advice. RoboForex shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.