GBP/USD Rates Buoyed By Extended Brexit Talks But Will Rally Last?

 

After all, negotiations remain hamstrung by the same two key issues – fisheries and the level playing field – that have plagued talks in recent months.

Moreover, French European Affairs Minister Clement Beaune has warned that “if there was an agreement and it was not good, we would oppose it with a right of veto”, adding that “I still hope that we can have an agreement, but we will not accept a bad deal for France”.

French President Emmanuel Macron has also reportedly lobbied the EU to push negotiations past the year-end deadline to pressure the UK into conceding ground on several key issues.

With that in mind, the British Pound could be at risk of significant losses in the near term, if an all-encompassing free-trade agreement remains elusive in the coming weeks.

GBP/USD DAILY CHART – DOUBLE TOP IN PLAY?

GBP/USD Rates Buoyed by Extended Brexit Talks But Will Rally Last?

GBP/USD daily chart created using Tradingview

From a technical perspective, GBP/USD rates could be at risk of an extended push lower, as prices carve out a Double Top formation just shy of key psychological resistance at 1.3500.

With the RSI dipping back below 50, and a bearish crossover taking place on the MACD indicator, the path of least resistance looks to favor the downside.

Slipping back below the 21-day moving average and 1.3300 mark could propel price towards confluent support at the March high (1.3200) and uptrend extending from the May low.

Clearing that would probably trigger a more extensive correction and bring the August low (1.2981) and sentiment-defining 200-DMA (1.2925) into focus.

GBP/USD 4-HOUR CHART – PSYCHOLOGICAL RESISTANCE CAPPING UPSIDE

GBP/USD Rates Buoyed by Extended Brexit Talks But Will Rally Last?

GBP/USD 4-hour chart created using Tradingview

However, zooming into a four-hour chart suggests GBP/USD may extend its recent push higher, as prices gap back above the 200-MA (1.3252) and former support-turned-resistance at the Pitchfork parallel.

That being said, with the RSI continuing to respect the downtrend extending from the November extremes and the MACD indicator tracking firmly below its neutral midpoint, an extensive topside push seems relatively unlikely.

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