GBP/USD – British Pound Suffers Major Setback Vs US Dollar
- The British Pound tumbled and traded below the 1.20 handle versus the US dollar this week.
- All trade talks related to Brexit caused a downside move in the GBP/USD pair.
- In the UK, the Manufacturing Production released by the National Statistics posted a rise of 0.2% in August 2016.
Brexit and UK Manufacturing Production
The Brexit trade talks were the main catalyst in the recent downside move in the British Pound. However, the GBP/USD nosedived today by more than 5%, and many say that it was due to French president Hollande’s ‘hard-Brexit’ comments.
Today during the London session, the UK Manufacturing Production, which evaluates the manufacturing output was published by the National Statistics. The market was excepting an increase of 0.4% in August 2016, compared with the previous month.
The outcome was on the lower side, as there was a rise of 0.2% only. In terms of the yearly change, there was an increase of 0.5%.
The report highlighted that “In August 2016, total production output was estimated to have increased by 0.7% compared with August 2015. There were increases in 2 of the 4 main sectors, with the largest contribution coming from water supply, sewerage and waste management output, which increased by 7.0%”. Overall, there was nothing for the British Pound, so it may continue to face offers in the near term.
GBP/USD Technical Analysis
The British Pound suffered heavy losses this week versus the US Dollar, as the GBP/USD broke many important and many year lows. There was even a move below the 1.20 handle today during the Asian session.
The daily chart of the GBP/USD pair is showing a bearish picture with a move below the 1.2800 support area. There was a break below a support trend line on the chart, which once broken, cleared the way for a drop below 1.2000.
However, the pair is now back above the 1.2300 level, but remains as a risk of more declines. The recent correction failed near the 23.6% Fib retracement level of the last major drop from the 1.50 high to 1.2800 low. So, we can say that the pair in the current wave may once again face sellers and continue its decline.
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