GBP/USD Slide On Brexit Talks Impasse; 1.33 Support Level At Risk
The GBP/USD resumed its downside retracement on Tuesday, after yesterday’s roller-coaster action. EU Chief Negotiator Michel Barnier had thrown the prospects of a Brexit trade deal out of the window when he told the EU Commission gathering that negotiations would continue until Wednesday, but no further, citing the Internal Markets Bill as a stumbling block to the deal.
The UK Parliament deliberated on the bill on Monday and offered to strike out the offending sections that conflicted with the Withdrawal Agreement, in a move that markets saw as a concession to EU demands. This has prompted a strong bounce off the daily lows. However, the impasse remains.
Reuters have quoted an unnamed spokesperson for the EU Commission on Tuesday as saying that the commission is not ruling out the continuation of talks beyond the transition period. Barnier has also reached out to David Frost, the UK’s Chief Negotiator, to move talks forward. These actions have provided some light at the end of the tunnel, capping further losses on the GBP/USD.
The pair is down 0.39% presently.
Technical Levels to Watch
Price continues to test the 1.33193 support level. Sellers violated this price support on Monday. However, buyers strongly rejected this move and truncated the break. This support price breakdown brings 1.32663 into focus, with 1.31754 and 1.30554 lining up as potential downside targets. The chances of the latter being achieved will depend on the break of the channel’s lower boundary.
On the flip side, a bounce at current support creates an opportunity to retest the 1.34765 resistance, with 1.35134 (13 Dec 2019 high) and 1.36117 (9 May 2018 high) lining up as potential upside targets. Attainment of these targets relies on a breakthrough in Brexit trade talks.