After closing yesterday’s trading over 90 pips lower at 1.2331, the weakness on GBPUSD continued to linger in today’s Asian session. The currency pair is down by 0.18% as it trades around 1.2313 ahead what could be a week of Brexit negotiations.
UK Prime Minister Boris Johnson has eased the lockdown restrictions in the UK from level four to three. This means that those who cannot physically work from home may go back to work if it can be done safely.
With this, the third round of negotiations between the UK and Brussels are expected to resume this week. One of the things that could be on the agenda would be EU countries fishing in British waters. Some analysts are bracing for a tough round of talks given that Johnson has already expressed his reluctance to issue long-term access to EU fishermen.
If this turns out to be the case, we could see some bearishness on GBPUSD. On the other hand, if negotiations go smoother than expected, the currency pair could trade higher.
On the daily time frame, a double top chart pattern looks to have been completed on GBPUSD. This is characterized by a market getting rejected at a resistance level twice. For this particular example, that price was 1.2630. This level also corresponds nicely with the 200 SMA as well as the 61.8% Fib level when you draw the Fibonacci retracement tool from the high of March 9 to the low of March 20. A strong bearish close below the low of May 7 at 1.2265 would effectively break the neckline support. This could then mean that GBPUSD is headed lower to support at 1.1400 where it bottomed on March 20.
However, be wary of a rally back up to the highs of April 30 at 1.2642. This could consequently invalidate the bearish chart pattern. It could then signal that a move higher will soon happen with the near-term resistance at 1.3133.