GBPUSD is leading gains among the major currency pairs in today’s Asian session. As of this writing, the currency pair is up by 0.26% at it trading 33 pips above its opening price at 1.2369. However, gains on GBPUSD could be limited. On the fundamental side of things, Brexit negotiations will intensify this week. Meanwhile, technicals show that the downtrend on the currency pair is still intact.
On Sunday, UK Chief Brexit Negotiator David Frost arrived in Brussels to begin talks with the European Union. Investors will be keeping tabs on whether the two parties are more amenable to come to a compromise. If talks hint that Brexit terms can be agreed on, we could see GBPUSD trade higher. On the other hand, if negotiations imply that a no-deal Brexit is the more likely outcome, GBPUSD could trade lower.
On the 4-hour time frame, it can be seen that GBPUSD seems to have found support at its June 19 lows at 1.2332. If there are enough buyers in the market, GBPUSD could trade higher and test the confluence of resistance around 1.2426. First, this price coincides with the 200 SMA. It also aligns with the falling trendline (when you connect the highs of June 10 and June 24). Additionally, when you draw the Fibonacci retracement tool from the high of June 24 to the low of June 26, it can be seen that the price coincides with the 50% Fib level.
If there are enough buyers in the market, we could even see GBPUSD close above this resistance level. If it does, the currency pair could trade to its June 24 highs at 1.2541.
On the other hand, a strong close below last week’s low at 1.2313 may mean that sellers continue to dominate market sentiment. GBPUSD could then fall to 1.2162 where it bottomed on May 25.