- Dovish comments by BoE’s Saunders exerted fresh pressure on GBPUSD.
- Increasing risk of no-deal Brexit further took its toll on the British pound.
- The set-up supports prospects for a further decline to the 1.3050-40 area.
The British pound was one of the worst-performing major currencies during the second half of the trading action last week. The GBP/USD pair retreated over 300 pips from YTD tops set on Tuesday and was pressured by dovish comments by the BoE MPC member Michael Saunders, saying that the UK central bank will probably need to ease monetary policy further to help combat the economic impact of the coronavirus.
This coupled with growing fears about a no-deal Brexit further took its toll on the sterling and continued undermining the sterling on the first day of a new trading week. Ahead of a crucial round of post-Brexit trade talks this week, British Prime Minister Boris Johnson set a deadline of October 15 to strike a free-trade deal with the European Union and ratcheted up the chances of trade negotiations failing apart.
From a technical perspective, the pullback constituted the formation of a bearish double-top near the 1.3480 region on a weekly closing basis. Meanwhile, the bearish formation is not confirmed until an important support is broken. That said, the pair still seems vulnerable to slide further below the 1.3100 handle, towards testing the 1.3050-40 congestion zone. The downward trajectory could further get extended towards the key 1.3000 psychological mark before bears eventually aim to test the 200-week SMA support, currently near the 1.2930 region.