Another day, another Brexit drubbing for the pound, as markets were not impressed with the guidance released today on the options of a hard Brexit. A number of key politicians and business groups are currently lobbying to make sure such a scenario never happens. However, as time goes on and optimism starts to wane, the effect on the pound continues to be a serious threat. The market is now expecting to see some sort of movement by the end of this year on Brexit, or else we could see further pound pain for traders.
The GBPUSD is currently pushing on support levels at 1.2798 as markets start to worry about the consequences. If the pain continues to be a factor and the USD strength continues to shine, then certainly I would expect traders to busy through this support level and look to march on 1.2652. With USD support continuing to be a major theme in the market, I would be surprised to see the bulls come back into the market. If they do then resistance at 1.2958 and 1.3069 is likely to be targets for traders aiming higher. However, that would be throwing caution to the wind in the current market climate.
Spare a thought for Australian dollar bulls who are continuing to suffer. After the recent positive economic data for employment and the upbeat nature of the economy, despite the struggles the Australian government is currently going through due to massive turmoil over leadership. This comes in the face of polls being negative for the incumbent prime minister, which in turn has lead to many challengers suddenly appearing. Nothing new for Australia politics however, which has seen a number of prime ministers toppled in the last decade. With economic data likely to be very light for the rest of the week I would expect markets to react sharply to political news more than anything, but a swift confirmation of a prime minister may certainly have a rally effect.
The AUDUSD as a result has hit support at 0.7237 at this stage, with traders likely to continue to add further pressure if the political situation continues. With this in mind support at 0.7178 is likely to be a key target for traders looking to capitalise on the situation. If the political situation were to improve for the better then the bulls could come back into the market and push up to resistance at 0.7310, however it would be a hard ask to push above this given the 50 day moving average and the trend line which is coming into play.