All hell broke loose ahead of Japan's opening, as the Pound collapsed. The GBP/USD pair went from 1.26 to 1.19 and back to 1.24 in a matter of minutes, and the market is still looking for an explanation on the move. Most talk about algos reacting to French President Francois Hollande comments, who said if the UK wants a hard Brexit, they will get it. A fat finger is another possibility, although the only known fact is that the GBP plunged by hundreds of pips against all of its rivals.
Data coming from the UK did little to help the Pound recovering, as Manufacturing and Industrial production fell in August, according to official figures. Total production output was estimated to have increased by 0.7% compared with August 2015 but fell by 0.4% when compared to July. Manufacturing increased by 0.5% from a year before, and by 0.2% in a month-on-month basis. Also, the trade balance showed that the UK's deficit on trade in goods and services was estimated to have been £4.7 billion in August 2016, a widening of £2.5 billion from July 2016. And bad news keeps coming from the Pound.
Ahead of the release of the US Nonfarm Payroll report, expected generally better than August one, the GBP/USD pair is extending its slide, down from 1.2476 to current 1.2380 region. Technical indicators are quite distorted after the mentioned slump, but the bearish momentum is undeniable, and the pair is poised to extend its decline, with a break below 1.2350 now exposing the 1.2300 region, en route to 1.2240/60.
Recoveries up to 1.2500 will be now seen as selling opportunities, although a recovery above the level can see the pair correcting up to the 1.2600/20 price zone, the pre-collapse levels.
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