By Jameel Ahmad, VP of Market Research at FXTM
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After appreciating earlier this month following a period of investors unwinding on USD positions, both the GBPUSD and EURUSD have attracted sellers as the month draws to a close.
Traders began to take profit on GBPUSD positions during trading on Friday where the Pound also reached a fresh 6-week high, marginally below 1.27. However, it has since slipped all the way back through 1.26 and looks to be at risk to falling back below 1.25 before the week draws to an end. While the majority of the momentum behind this move is led by technicals, investors are reluctant to consider longer-term buying positions on the Pound bearing in mind the continuous uncertainty with the United Kingdom leaving the European Union.
The longer-term risk for the Pound still rests with the eventual invoking of Article 50 and although the previous concerns over a “hard Brexit” have softened significantly, this does not change the position that the UK will be exiting the European Union and there will naturally be a period of uncertainty ahead, with months or even years of ongoing negotiations still to take place. The clock is very much ticking when it comes to the invoking of Article 50, and Theresa May now has barely a few days over two months before needing to meet the personal deadline she pledged to the public at the end of March.
Keeping in mind that the U.K. will continue dominating headlines with the clock ticking down before Article 50 needs to be invoked, many would naturally feel this will present risks for the British Pound. While this is likely to be the case, it is the Eurodollar that is going to face the largest downside risks in the near-term. The reason for the sudden rush of momentum in the EURUSD is once again largely led by technicals, but this does not change the outlook that the pair remains at risk of falling even lower before the end of the week after already dropping from 1.0764 to 1.0656 over the last trading day.
The EURUSD has also began the final day of the trading week under selling pressure, and ambitious traders will be wondering whether the pair could be at risk to reversing its gains from 1.05 earlier in the month.
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