GBP/USD: A Function Of USD Performance For Now

With the UK parliament set to reconvene on January 9 to resume the Brexit deal negotiations, we find a Pound exchanging hands at awfully cheap levels if one only pays attention to the UK vs US yield spread.



However, unlike the Euro, the Sterling has some serious political risks to contend with before the next move in the Brexit saga, which is obviously keeping the downside pressure intact in line with the bearish structure on the weekly and daily timeframes.



As shown above via the magenta line (1/DXY), the Sterling has been trading tightly correlated to the performance of the US Dollar, therefore, with a EUR/USD soon to be at a discount (sub 1.13), and with the yield spread on a tear, liquidity pockets neary 1.25 should be an attractive area to engage in near-term buys. This should prevent the currency from breaking much lower unless the move originates from a GBP-centric weakness (demerits) due to negative Brexit headlines.



Notice the relevance on the measured move principles taught previously and how in today’s price crash during the Asian session market-makers bids around the 1.24 have proven to be the very bottom of the move, further solidifying the view that the market should still remain underpinned by bargain hunters. Structurally, this is a market that appears set to stay offered on rallies too, with any pullback set to face a major roadblock at 1.1210-15, Wed’s POC.