The pound crashed lower during the course of trading yesterday showing us how flimsy the move higher has been. Just a bit of dollar strength with lack of major updates from the Brexit process, and we have seen the pair correct by close to 500 pips in just a few days, basically nullifying the move that we have been in this pair in the weeks before.
GBPUSD On Flimsy Ground
While the GBPUSD pair took weeks to move higher by 800 pips on the back of some progress in the Brexit process and also due to the weakness in the dollar, it has only taken it a few days of dollar strength to send it spiraling downwards. Yesterday, we saw the pair crash through the 1.40 region and then the 1.39 region during trading only to see a recovery late in the day which helped the pair back upward and it now trades below the 1.40 region as of this writing.
It looks as though the break below the 1.40 is fully done for and this means that the bears are back in control of the pair. The dollar has been on the backfoot over the last few hours as the Trump administration once again faces an economic shutdown with voting being scheduled once again but we believe that this would only be a temporary setback for the dollar and we should see the dollar continue to gain in strength later in the day.
As far as the pound is concerned, the focus of the markets seems to be on the BOE rate announcement and statement that is scheduled to be released tomorrow. We are likely to see the BOE have the rates on hold for now but it is the accompanying statement that is likely to draw the attention of the traders. If it turns out to be hawkish, pointing to rate hikes in the near future, then the battle between the bears and the bulls would begin again.
This article was originally posted on FX Empire
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