GBP/USD: Bears eye a break below 1.3140 – key support

• DXY finds buyers near 94.70 levels
• Weighed down by risk-aversion
• Markets await the Brexit transition terms.

The GBP/USD pair accelerated its declines last minutes, dropping sharply towards the 100-DMA at 1.3141 amid resurgent USD demand across the board.

GBP/USD: Brexit uncertainty looms

After witnessing a brief phase of consolidation around 1.3170 levels in the Asian trades, the spot broke to the downside, as the demand for the US dollar picked-up pace following the comments from the Philly Fed President Harker, noting that the Fed is on pace for a Dec rate hike.

Moreover, markets resort to profit-taking after this week’s solid rebound, as they turn cautious ahead of the release of the EU’s Brexit transition terms due to be outlined later today. If the EU and UK fail to reach a transitional deal sooner, it would add to more uncertainty and weigh negatively on the GBP.

Also, downbeat BRC retail sales data combined with the BOE’s dovish rate hike continue to undermine the sentiment around Cable. In the day ahead, it remains to be seen if the US dollar sustains the latest recovery attempt, as investors digest the US tax reform news, which cited a possible delay to the corporate tax cuts by one year.

Calendar-wise, there is nothing of note and hence, the focus remains on the USD price-action and sentiment on the European markets for fresh trading impetus.

GBP/USD Technical View

Jim Langlands at FX Charts, writes: “The short-term momentum indicators look mildly positive although the dailies remain in neutral, so a cautious stance is required although a break of nearby resistance at 1.3175/80 would then allow for a run towards 1.3225/50. On the downside, minor support will be seen at 1.3150 and then at 1.3135, below which could see a run back to 1.3100/10 and the 6 Nov low of 1.3057 although this looks unlikely.”