CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.

GBP/USD: further losses likely as no-deal Brexit looms

Whether you study the fundamentals, favour technical analysis or use IG client positioning data, more weakness is possible for GBP/USD as a no-deal Brexit approaches.

GBP/USD talking points

  • The increasing likelihood of a no-deal Brexit is continuing to undermine GBP/USD
  • The pair is also looking weak from a technical viewpoint and IG retail trader sentiment data is sending out a bearish signal
  • This all means GBP/USD could extend its recent sharp decline

GBP/USD has tumbled from a high of $1.4377 in April last year to a low of $1.2080 this month, taking it back to levels last seen in January 2017. Often after such a precipitous drop, a period of consolidation is seen but fundamentally, technically and from a sentiment perspective, there are few signs yet of a forthcoming rally.

The new UK prime minister, Boris Johnson, has pledged to leave the European Union (EU) on 31 October 'do or die' – and with neither side seemingly willing to give ground, that has increased the likelihood of the UK exiting the bloc without a deal, a prospect likely to lead to further GBP selling.

In addition, the Bank of England (BoE) is widely expected to cut its benchmark interest rate from the current 0.75% in the months ahead as it weighs up the impact of a no-deal Brexit and a global economic slowdown.

Learn more about forex and how it works

GBP/USD breaks to the downside

Meanwhile, from a technical perspective, GBP/USD has broken to the downside from a falling channel on the charts, implying further losses once the current period of consolidation has run its course. It remains in a technical downtrend, with the 200-day moving average (MA) above the 100-day MA, which is above the 50-day MA, which is in turn above the 20-day MA.

The 14-day relative strength index (RSI) remains below the 30 level, signalling the pair has been oversold but is higher than it was at the start of this month.

GBP/USD price chart, daily timeframe (30 April – 7 August 2019)

The message from an analysis of the positioning of retail traders using IG is similar. The data shows 78.1% of these traders are net-long, with the ratio of traders long to short at 3.57 to 1. In fact, traders have remained net-long since 6 May, when GBP/USD traded near $1.2981, the price has moved 6.4% lower since then. The number of traders net-long is 1% higher than yesterday and 4.7% lower from last week, while the number of traders net-short is 0.7% lower than yesterday and 11.1% lower from last week.

At DailyFX, a contrarian view is often taken to crowd sentiment, and the fact traders are net-long suggests GBP/USD may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD bearish contrarian trading bias.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

Start trading forex today

Find opportunity on the world’s most-traded – and most-volatile – financial market

  • Trade spreads from just 0.6 points on EUR/USD
  • Analyse with clear, fast charts
  • Speculate wherever you are with our intuitive mobile apps

See an FX opportunity?

Try a risk-free trade in your demo account, and see whether you’re onto something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See an FX opportunity?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Get spreads from just 0.6 points on popular pairs
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See an FX opportunity?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.