GBP/USD: bears looking for a break below the key 1.28 handle

• GBP/USD bears licking their lips, but this should be a strong level of support on a technical basis.
• GBP/USD is suffering due to UK PM May is reportedly stepping up “hard Brexit” preparations.
• "Below 1.28, retracement risks extend to 1.25 and the 1.20 area" - analysts at Scotiabank argue.

Since the end of July, GBP/USD has been in freefall and has plummetted from the top of the descending channel at 1.3172 (30th July high) and has just made a fresh daily low in the North American session today at 1.2835. 

Analysts at Scotiabank explained that GBP/USD slipped as hard Brexit jitters continue to weigh on sentiment:

"There were no UK data releases today (trade, industrial production and GDP data are all due tomorrow, however). UK PM May is reportedly stepping up “hard Brexit” preparations and has lined up a top-level cabinet meeting for early Sep to discuss the way forward. Uncertainty risks unsettling the GBP in the coming weeks as exit talks with the EUR appear to have reached an impasse."

Subsequently, the pound is meeting the bottom of the descending channel, (fulfilled by a recent spike in the greenback in the NY session*) - a channel that was formed at the lows of 28th May's business and a support that has held, bar one day's supply on the 22nd July, since it was formed. However, there is a far greater degree of bearishness around the pound since Carney and Fox spoke out about their pessimistic outlook for Brexit and the pound is vulnerable to a break below the 1.28 handle of which will surpass the 11th July 2017 lows and open the 23rd August 2017 lows of 1.2773. This is a significant level as being when sterling finally found a footing, stabilising on the snap election results after about a year of bearishness since the EU referendum - (the post EU referendum low was at 1.2796).

Next up, US CPI and UK GDP - previews: 

• US: Headline CPI to hold steady at 2.9% y/y in July - TD Securities
• UK GDP Preview: Forecast of Q2 GDP pickup set to ease pressure off Sterling

Greenback on the march as  Feds Evans turns hawkish*

• Fed's Evans: One or two more rate increases 'reasonable' by end of year

Fed Evans has been speaking to reporters saying that the US Economic fundamentals are strong and that the labour market is still improving:

• Economy generating inflation close to Feds 2% goal.
• Sees Fed becoming restrictive in 2020 but could be 2019.
• Trade tariffs adding some uncertainty.
• Modestly restrictive effect policy may be warranted.
• Economic fundamentals strong, labor market still improving.
• Sees one or 2 more rate increases in 2018.
• Business confidence following tax cuts and deregulation are being offset by uncertainty from trade and tariffs.
• Debate over whether to pause or continue higher into restrictive policy to intensify next year as Fed approaches neutral interest rate.

GBP/USD levels

Analysts at Scotiabank argue that the GBP/USD short-term technicals and neutral/bearish :

"Sterling is soft and prone to more weakness from a technical point of view. Intraday price signals suggest that a minor low may have been reached earlier in the London trading session but scope for GBP gains remains quite limited in the context of a market that has developed a well-defined downtrend in the past few weeks. Trend signals are aligned bearishly for Cable on the short, medium and longer run charts, suggesting that minor gains – such as the minor pop to the 1.29 area seen through late morning European trade – are a sell. Below 1.28, retracement risks extend to 1.25 and the 1.20 area."