GBP/USD - holds 1.20… for how long?

GBP/USD gapped lower at 1.20 in response to news reports suggesting that UK PM Theresa May is all set to call for ‘hard Brexit’ on Tuesday.

A recovery attempt quickly ran out of steam at 1.2054 following which the spot fell back to 1.2020 levels.

Bulls need to defend 1.20

The area between 1.20 and 1.21 acted as a strong support zone in the final quarter of 2016. Hence, the bulls need to defend 1.20 else sell-off could gather pace. Moreover, Theresa May is scheduled to speak on Tuesday, which means there is ample scope for bears to attack the key psychological mark of 1.20.

The pain may not stop tomorrow following May’s speech. This is because, May has also promised to trigger article 50 by end March.

Overall, the odds of a bearish break below 1.20 are high. Nevertheless, a minor probability of a rebound/recovery exists so long as the bulls are able to defend 1.20 levels.

GBP/USD Technical Levels

Below 1.20, there is nothing on the technical charts that could act as support. The flash crash low is debatable. Fib extension drawn from 2007 high - 2009 low - 2015 high shows a support comes around 1.1340 (76.4% extension). On the other hand, a rebound from 1.20 followed by a daily close above 1.21 could yield a technical recovery to 1.22 (Dec low).