GBP/USD Dips Failing to Attract Buyers

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- GBP/USD losing ground on Brexit delay

- Traders not buying dips anymore

- Pair at risk of further downside

Investor sentiment around the Pound-to-Dollar exchange rate has darkened as a result of recent developments in the Brexit drama, and buyers are no longer stepping into and dips, says Richard Perry, an analyst at FX Broker Hantec Markets.

Whereas previously "the market consistently bought into weakness,” now “the sentiment has shifted," says the analyst, suggesting bulls are leaving the market increasing the risk of more downside.

Boris Johnson’s hopes of delivering a Brexit by Halloween ended on Tuesday after Parliament voted to reject a bill outlining a ‘fast-track’ implementation programme of his deal. In a separate vote the deal itself, however, won a majority.

Unable to implement Brexit by the deadline, Johnson has had to go back to the EU to ask for an extension. The length of the extension may be significant too.

The expected delay brings with it a whole host of other risks that could derail Brexit itself. For example, the longer the delay, the more time Parliament has to alter the deal by tabling amendments, such as for example, that the deal should be conditional on the country having a final say in another referendum; something which could potentially derail Brexit altogether.

Johnson may prefer instead to call a general election in order to secure a greater working majority so as to get Brexit through.

“We believe that the delay to Brexit beyond 31st October (an extension to Article 50) will be a drag on Cable,” says Perry. “The length of the delay will determine how much of a drag we see.”

From a technical perspective the outlook is growing more bearish after “Yesterday’s negative candle came with a breach and close below Monday’s low,” says Perry.

The analysts sees the potential for a correction back down to the 1.27s.

"The hourly chart shows a small 135 pip top pattern completed to imply a retreat towards $1.2750 now. This suggests that the old breakout at $1.2785 will be at least tested. There are other supports at $1.2700 (minor).." adds Perry.

A break below the 1.27s would then see the next support and resistance level come in at 1.2580.

Another bearish sign is that momentum indicators are starting to "sag" and if RSI moves below 60 it would be a negative sign.

Any recoveries may be capped by resistance at 1.2875/1.2900, says the market analyst.

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