Sterling-dollar is under tremendous pressure today because of two main reasons: firstly, it is the strength in the dollar index which has pushed the pair below the critical level of 1.24. This is despite the fact that the Fed is going to cut the interest rate by 25 basis points this week. Secondly, Boris Johnson, the UK Prime Minister has increased chances for a no deal Brexit scenario which no one likes-especially not the investment community. The fact is that this is an uncharted territory and we already know with more certainty that leaving the EU with a deal is going to have meaning impact on the economy and leaving the EU without any deal is going to have even worse impact.
I still believe that Boris actually is playing a tactical game with the EU by sending them the message that he isn’t afraid of going for no deal Brexit if the EU doesn’t open the negotiation process. For traders, it is a matter of throwing the towel first. If ego remains the major obstacles, then a major accident is going to happen and this means no deal Brexit.
In terms of technical analysis, I think it is highly that the current downward move and the momentum behind it may push the sterling-dollar pair all the way to 1.2110, a low not witnessed since 13th March 2017. The near-term support is at 1.2255 and a break of this is going to open the floor towards the next support level mentioned above. As for resistance, it sits at 1.2459.
