GBP/USD slumps to a low of 1.2910, effectively erasing yesterday's bounce
The pound is struggling for traction this morning as we get towards the EU summit and despite the optimism from yesterday about the UK possibly extending talks beyond this week, nothing is a given just yet at the moment.
EU leaders are anticipating for that now and have moved to posture accordingly, expecting to throw the ball back to the UK's court to move on the key outstanding issues.
As such, Boris Johnson may still very well consider pulling the plug tomorrow should there be a less than desirable communique from the EU camp after this week's meeting.
Add that to London facing tighter lockdown restrictions, where millions will be affected, it is adding to concerns surrounding the UK economic recovery as of late.
A bit of a double whammy for cable is that the dollar is also gaining decent ground in trading today amid the risk-off mood in the market.
That has seen cable slide from 1.3020 back below 1.3000 and under both key hourly moving averages, which puts sellers in near-term control for now.
There is minor support around 1.2900 next but the lows yesterday and from 7 October @ 1.2846-63 will be a key spot to watch as that will see the downside momentum pick up towards the 100-day moving average @ 1.2831 next.
Looking ahead, all eyes will stay on how the meeting goes in Brussels today before getting to know the official EU stance on how they want to progress with Brexit talks. Thereafter, it will boil down to Johnson's response tomorrow or over the weekend potentially.
The latter will arguably be the key risk factor for the pound in the coming sessions.
Meanwhile, amid the risk-off wave today, the dollar side of the equation is also starting to see some interesting changes. So, be mindful of how the risk situation develops in the coming days and what the market is actually focusing on in that regard.
Elsewhere, GBP/JPY price action is also seeing a more bearish development as price action now breaks the confluence of its key daily moving averages @ 136.49-52. Keep a break below that and sellers will establish a more bearish momentum ahead of the weekend.
