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GBP/USD succumbs to political uncertainty, dips below 1.31

  • Brexit uncertainty and challenge to May's premiership are hurting the Pound.
  • Cable trades below 100-day MA.  
  • Weak Treasury yields offer no relief.

The pound is being offered today on reports that the rebel Tory MPs are just eight votes short of ousting PM Theresa May.

As of writing, the GBP/USD pair is trading at 1.3097; down 0.70 percent on the day. The pair has also breached the 100-day MA support of 1.3109.

The political uncertainty is overshadowing the stronger industrial production and trade balance released on Friday. Also, weakness in the treasury yield is being ignored as well. As of writing, the 10-yr treasury yield is down more than one basis point. More importantly, it failed to take out critical resistance of 2.4 percent earlier today.

The Pound could remain on the back foot during the rest of the day, courtesy of political uncertainty. Still, aggressive bears need to observe caution as the 10-year treasury yield has failed to take out 2.4 percent. The week ahead promises to be a big one for Sterling with labor, inflation and retail sales reports scheduled for release.  

GBP/USD Technical Levels

Jim Langlands from FX Charts sees a dip in Sterling as a buying opportunity. Langlands writes, "Sterling had a bumper session in comparison to everything else; rising sharply after the release of the Manufacturing/Industrial Production easily beat expectations, sending GbpUsd up to 1.3228 before settling the week at 1.3200.

The momentum indicators remain in neutral, so a cautious stance is required and further choppy trade near current levels would not really surprise although the 4-hour momentum indicators do look mildly positive, and a break of 1.3225/30 could see a run towards 1.3250 and possibly on to 1.3275. At this stage, 1.3300 (2 Nov high) does seem too far off to consider unless the US$ comes under pressure of its own.

On the downside, support will be seen at 1.3180 (Minor) ahead of 1.3155 and then at 1.3110. A cautious stance is needed but if anything I suspect we may be in for a test of the topside."

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