GBP dumps 200 pips, buy on the dips?

The pound was battered initially in early trading on Monday, as markets became suddenly very nervous about the lack of progress with the Brexit negotiations.

Comments hit the newswires from UK Prime Minister Boris Johnson detailing that he is ready to pull out of the Brexit talks unless the European Union agrees to budge on its demands.

It sparked a wave of panic selling by traders, as they started to price in the worst-case, which would be a no-deal. GBP has been pushing aggressively to the upside over recent weeks, thanks to the dominating risk-appetite theme and a weaker USD, in addition to optimism that a deal will get done.

The move lower was also somewhat of an excuse for a needed technical correction, following the very one-directional moves.

Will the sell-off continue?

Dips have already appeared to have been bought by market players, bouncing from the worst levels of the day.

We believe the thought of there is still light at the end of the tunnel is in many minds. Yes, time is ticking, but there is still time and hope that something can be done before the deadline.

Markets are very hungry and have many strong fundamental factors for the theme of risk-appetite to continue. Given this, the attractiveness for dip buying will remain high for now, until and only if talks end between EU and Britain without a deal or they talk away before hand.

Technically overview

As detailed in the prior GBP article, GBP/USD continues to flirt around a big neckline area of an inverse head and shoulders structure, which could still very well play out.


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