GBP/USD Forecast: A hundred pips down, more to come? Three reasons for the downfalls

GBP/USD has been plummeting from the highs amid tensions with China.
Reports about abandoning Brexit talks are also weighing on sterling.
Hopes for a vaccine made way to doubts about antibodies.
Wednesday's four-hour chart is showing bulls are still in the lead.

Yohay Elam FXStreet

Houston, we have a problem – and this time it is not related to strained hospitals in America's fourth-largest city but rather to Sino-American relations. That is the latest GBP/USD downer and others are also weighing.

1) Houston consulate closure

The US has ordered the closure of China's consulate in Houston. The state department says that it comes amid Intellectual Property (IP) violations – stealing trade secrets. Earlier, images coming of the Texan city showed a fire coming out of the consulate – potentially workers burning documents.

The safe-haven US dollar is on the rise, recovering part fo its losses.

Sino-British relations had intensified earlier in the week, as the UK canceled its extradition treaty with Hong Kong following Beijing's tightening grip on the city-state. Britain will also phase out the usage of Huawei's 5G technology.

2) Bye-bye Brexit talks?

The Daily Telegraph – a UK media outlet with ties to the Conservative Party – reported that Prime Minister Boris Johnson's government is contemplating abandoning Brexit talks. Negotiations with Brussels have been stuck in recent months, but both sides have been committing to continuing talks.

While this report may be a negotiating tactic, it dampens the mood and weighs on the pound.

US Secretary of State Mike Pompeo visited London and while both counties seem united on the Chinese front, an Anglo-American trade deal is still far off.

3) Vaccine cooldown

Early in the week, sterling and broader markets benefited from the University of Oxford's progress toward a COVID-19 vaccine. The encouraging news of the Phase 1/2 trial conducted in collaboration with AstraZeneca has now made a place for some skepticism.

Doubts about the efficiency of that vaccine candidate have taken some of the wind out of the pound's gains. Another blow came from the New England Journal of Medicine, which reported that recovered coronavirus patients saw their antibodies fading away after an average of 73 days.

The long road toward resolving the issue is weighing on stocks and boosting the dollar.

While UK COVID-19 cases are declining, US figures remain elevated, with deaths surpassing the 1,000 mark for the first time since early June. President Donald Trump made an abrupt U-turn, calling on people to wear masks and warning things could worsen before they improve.

Overall, fundamentals are pointing to further falls for GBP/USD.

GBP/USD Technical Analysis

Contrary to news developments, technicals remain upbeat. Pound/dollar is benefiting from upside momentum and trades above the 50, 100, and 200 Simple Moving Averages. Moreover, the Relative Strength Index has dropped below 70, exiting overbought conditions.

All in all, bulls have the upper hand.

Support awaits at 1.2610, where the 50 SMA hits the price. The next cushion is at 1.2565, a swing low from mid-June. It is followed by 1.2530 and 1.2510.

The former triple top of 1.2670 returns to its role as resistance, followed by 1.2715, a stepping stone on the way up. July's high of 1.2770 and June's peak of 1.2815 are next.

More 2020 Elections: Trump is losing his economic edge, for three robust reasons

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

EUR/USD holds losses near 1.1850 as US, China holidays keep trade muted

EUR/USD opens the week on a softer note, trading near 1.1860 during the Asian session on Monday. Activity is likely to remain muted, with United States markets closed for the Presidents’ Day holiday, while Mainland China is also shut for the week-long Lunar New Year break.

GBP/USD flat lines as traders await key UK macro data and FOMC minutes

The GBP/USD pair kicks off a new week on a subdued note and oscillates in a narrow range, just below mid-1.3600s, during the Asian session. Moreover, the mixed fundamental backdrop warrants some caution for aggressive traders as the market focus now shifts to this week's important releases from the UK and the US.

Gold remains below $5,050 despite Fed rate cut bets, uncertain geopolitical tensions

Gold edges lower after registering over 2% gains in the previous session, trading around $5,030 per troy ounce during the Asian hours on Monday. However, the non-interest-bearing Gold could further gain ground following softer January Consumer Price Index figures, which reinforced expectations that the Federal Reserve could cut rates later this year.

Top Crypto Losers: Dogecoin, Zcash, Bonk – Meme and Privacy coins under pressure

Meme coins such as Dogecoin and Bonk, alongside the privacy coin Zcash (ZEC), are leading the broader market losses over the last 24 hours. DOGE, ZEC, and BONK ended their three consecutive days of recovery with a sudden decline on Sunday, as crucial resistance levels capped the gains. Technically, the altcoins show downside risk, starting the week under pressure.

Global inflation watch: Signs of cooling services inflation

Realized inflation landed close to expectations in January, as negative base effects weighed on the annual rates. Remaining sticky inflation is largely explained by services, while tariff-driven goods inflation remains limited even in the US.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.