After flirting with 1.2700 last week, the GBPUSD finds itself under pressure once more as renewed Brexit-related uncertainties have reappeared. A round of optimism hit the markets last week on some key concessions on both sides. However, negotiators from the UK and EU have failed to come up with a final agreement on the controversial Irish backstop.
Negotiations between both sides are to end once and for all before the EU summit, with just over 2 weeks to spare until Brexit is complete on October 31. The Brexit deadline has once more been reinforced by the Queen’s speech at the State Opening of Parliament. The Queen has said that the priority of the British government’s priority is to exit from the European Union on October 31st.
Meanwhile, leaders of the EU summit will meet on Thursday and Friday, which gives the negotiators on both sides little time to work out a deal.
Investors were also pleased with the outcome of the first phase of the US-China trade talks with some good US Dollar demand in Monday’s European session. This also contributed to the retreat of the pair in London trading.
However, the US Columbus day celebration and the absence of major economic indicators this Monday leaves the GBPUSD open to technical plays.
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GBPUSD Technical Outlook for the Day
After Friday’s highs of 1.2705, the GBPUSD is trading at 1.2526 (as at the time of writing). Friday’s intraday high is also the highest level that the GBPUSD has traded since July 2. It also corresponds to the 50% Fibonacci retracement from the swing high of March 13 to the swing low of September 3.
Price has also broken below the support formed by the July 12 and September 20 highs (previous resistance acting as support in role reversal). GBPUSD is now inching lower to the next minor support level at 1.2505 (June 18 low). This level is also the 38.2% Fibonacci level.
A break below 1.2505 will open the door towards the 1.2294 price level (23.6% Fibonacci level and (Aug 23 high in role reversal and September 12 low).
On the flip side, if GBPUSD finds support at the 1.2505 level, then upside test of1.2587 and 1.2705 above it is also possible.
Economic indicators for the week are a bit scanty comparatively and action will resume on the fundamental front with a speech by the BoE Governor Carney on Tuesday. This will be followed by the annualized CPI report on Wednesday.