- GBP/USD has kicked off the week with falls as Brexit uncertainty looms.
- Concerns about US-Sino trade tensions also weighs on sentiment.
- Monday’s four-hour chart is pointing to further losses.
“It would always be the UK’s choice, not ours,” – said Chief EU Negotiator Michel Barnier when referring to a scenario of a no-deal Brexit. French President Emmanuel Macron, Barnier compatriot, has given UK Prime Minister Boris Johnson until Friday to come up with new proposals. Dominic Cummings, Johnson’s senior aide, said that if the bloc does not soften its position, the UK would be ready to leave.
The bad blood comes ahead of the critical EU Summit on October 17-18 and ahead of Brexit Day – October 31. Johnson repeated his stance that the UK would leave by the end of the month in op-eds for two newspapers. However, in a submission to a court in Scotland, 10 Downing Street said that the government would obey the Benn Act. The law obliges the UK to ask for an extension if parliament fails to instruct otherwise by October 19.
The question of Ireland remains the critical stumbling block to a deal. Johnson insists that his plans mean no new physical barriers. The EU insists that differences between rules in Northern Ireland and the Republic of Ireland – as suggested by Johnson – require new checkpoints. Both sides have pledged to keep open borders, seen as essential in keeping the peace in the Emerald Isle.
Uncertainty about Brexit negotiations and also US-Sino ones weigh on GBP/USD. China will reportedly limit the scope of its new offers and will not cede ground on sensitive issues such as industrial planning. The news comes ahead of high-level talks scheduled on Thursday in Washington.
Beijing may be trying to take advantage of President Donald Trump’s impeachment issues. Additional whistleblowers are set to step forward and shed more light on the Ukraine-gate scandal. Opinion polls have shown that Trump’s support is falling, but far from being enough to convince his Republican peers to abandon him.
The US labor market is still growing at a satisfactory pace. Friday’s Non-Farm Payrolls report for September has shown an increase of 136,000 positions, and revisions added 45,000. Wage growth stalled last month, but this may be a one-off.
Overall, news about both sets of talks is set to dominate GBP/USD trading today.
GBP/USD Technical Analysis
GBP/USD is trading alongside an uptrend support line and has managed to stay away from the precipice for now. However, it has lost the 50 and 200 Simple Moving Averages. Momentum is almost flat. All in all, the picture is mixed.
Support awaits at 1.2275, which was a cushion in late September. It is followed by 1.2235, which was a swing low earlier that month, and by 1.2205, which is October’s low. 1.2155 and 1.2065 are next.
Resistance awaits at 1.2245, which capped GBP/USD in late September. Next, 1.2390 was a separator of ranges on several occasions and is critical resistance. Above, we find 1.2415, which is the high point this month.
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