GBP/USD continues to trade above the 200-hour MA
The pound is still holding relatively steady after an earlier pop lower towards the 200-hour MA (blue line), which is believed to be triggered by a UK official labeling reports of a financial services deal ‘unsubstantiated’. I wouldn’t be too surprised even if that is the case as journalists these days tend to sensationalise headlines to sell stories. It’s all part of the business.
Regardless, the damage has already been done and as mentioned earlier in the day, today’s move in the pound has a lot more to do with short covering. Just look at the moves seen in AUD/USD and NZD/USD and it’s plain for all to see.
There’s good reason to temper expectations of a Brexit deal and the optimism seen since overnight, but the fact is crowded short positioning is something you can’t ignore. In a time when the dollar momentum is fading fast, it’s best to get out of the way.
And from the near-term chart in GBP/USD, buyers are now the ones in near-term control as they defended the 200-hour MA (blue line) earlier before moving back up again. There’s also minor resistance around 1.2919 that has helped to limit gains seen so far today but it’s very much still all about positioning when it comes to dollar pairs.
I’d argue that if you’re looking to short the pound on hopes of a Brexit deal being dashed, it’s better against other currencies at this point because the dollar selling has been unrelenting today.
The weakness seen in the dollar and the yen so far today is meeting a pause now as we await US traders to come in but given the mood we’re seeing so far and how stretched positioning has been, I wouldn’t be surprised if we continue in the same manner ahead of tomorrow’s US jobs report.