The GBPUSD pair is up slightly mostly due to the overall weaker US dollar ahead of the first debate between Donald Trump and Joe Biden. The pair is trading at 1.2772, which is a few pips above last week’s low of 1.2678.
There are several things that have been moving the GBPUSD recently. First, the US dollar has been relatively strong because of the rising geopolitical risks as the US and China flex their muscles. Investors tend to rush to the safety of the dollar when risks rise.
Second, the number of new coronavirus cases in the UK has led to fresh risks about the economy. Yesterday, the country confirmed more than 5,000 cases after it reported more than 6,000 on Saturday. The country has reported more than 20,000 cases in the past week, which is a sign that the situation is getting worse. The GBP/USD tends to fall when there’s these risks.
Third, the GBPUSD has weakened recently because of the overall weak economic data from the United Kingdom. Last week, data showed that the services PMI declined to below 50 in September. That is a sign that the weakness of the economy has started. Worse, the weakness will continue as the UK implements the new limits on movement.
Fourth, the GBP/USD has fallen because of the rising political temperatures in the United States as the election nears. This has been made worse by the rising violence in several cities. Also, Trump has not committed to a peaceful transfer of power, which has made the situation worse. Tomorrow, all eyes will be on the first debate between Donald Trump and Joe Biden.
GBPUSD technical outlook
The daily chart shows that the GBPUSD has been in a consolidation phase in the past three days after it reached the 38.2% Fibonacci retracement level. The price is also below the 25-day and 10-day exponential moving averages. Most importantly, it seems to be forming a bearish pennant pattern that is shown in green.
Therefore, while this consolidation is likely to remain today, the pair is likely to break out lower in the near term. That will see it drop to the 50% retracement at ~1.2452. On the flip side, a move by the pair above the 23.6% retracement at 1.3000 will invalidate this trend.