Brexit

GBP/USD Forecast As Brexit Game Theory Continues

The GBP/USD is paring back earlier gains as traders start to question the possibility of a deal between the UK and the EU. It is trading at 1.3315, which is slightly below the intraday high of 1.3365.

What happened: Last week, Boris Johnson and Ursula von der Leyen had a dinner meeting in Brussels where they set yesterday as the deadline for Brexit talks. Well, by yesterday, the two sides had not reached a deal but the two leaders asked the teams to continue the talks. This reassurance pushed the GBP/USD to today’s high of 1.3365. The pair has now lost momentum as traders question whether the two sides will reach a deal.

Why it matters: Time is running out since the UK has about two weeks to reach a Brexit deal. If there’s no deal by December 31st, the two sides will start putting tariffs on each other. Visitors will also require visas to travel. In total, this could lead to a 2% decline of UK’s economy, more than 300,000 job losses, and potential negative rates. Some analysts believe that the GBP/USD would slide by more than 20% without a deal.

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GBP/USD forecast

What next for GBP/USD? On the two-hour chart, we see that the GBP/USD pair gapped-up to a high of 1.3365 today. It is now probing the lower side of this gap even as the Average True Range (ATR) continues to rise. This is a sign that the pair is getting more volatile. Therefore, for the rest of the day, the pair may continue falling as bears target the next support at 1.3250.

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GBP/USD technical chart

GBP/USD

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