Sellers are looking to build on the downside momentum seen overnight
The downside break came after the resignation of Boris Johnson - which threw further ambiguity surrounding support for UK PM May - and the political uncertainty there provided just the right appetite for sellers to drive the pound lower.
At the lows, GBP/USD tested the 200-hour MA (blue line) before finding a rebound and in trading so far price has moved back below the 100-hour MA (red line) - eliminating the near-term bias that favours buyers.
The pair is now trading at the lows currently at 1.3227 with the dollar also gaining further ground on the day. The 1.3200 handle will be the next support level to eye for and nearby is the 200-hour MA @ 1.3198. That will be the key support level for buyers to defend, as a move below will open up a near-term bearish bias in the pair.
Yesterday's rebound stalled at the 50.0 retracement of the sharp move downwards:
And the pair consolidated after around the 100-hour MA before moving back lower in trading today.
The risk for the pound today will come from more Brexit and political headlines as well as UK data to come later on. We'll have factory output data for May alongside the ONS' first release of its monthly GDP. All of this of course will feed into sentiment surrounding the possibility of a BOE rate hike come August - which will likely outweigh all the Brexit noise we've been getting so far this week.
For now, we're trading between the "goal posts" and with the dollar in demand the momentum is siding a little with sellers but look out for key headlines and risk events to come as that will add to the current picture we're seeing right now.
As for my view, I don't see how the data today will change too much of the current situation - unless there's a major surprise with a strong beat to the upside - so if the dollar holds its ground, sellers will still remain dominant in the near-term as price stays below the 100-hour moving average.
