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GBPUSD - Returns to Resistance at 1.3250 Level as Brexit Talks Paused

   

 

GBPUSD - Returns to Resistance at 1.3250 Level as Brexit Talks Paused
 
In the last week the GBPUSD has climbed back up to the current key level of 1.3250 which has been offering resistance for the last two weeks. It had previously made a run at this level reaching a two month high, before it was sold off and this move was on the back of a healthy surge back above the key 1.30 level after the GBPUSD traded around this level for several weeks with an increase in volatility. If it can maintain a break above the 1.3250 level it may threaten the nine month high near 1.35 that it reached at the end of August. It may also enjoy some support from 1.3250 to assist any movement higher. The 1.30 level has played a significant role in the price action of the GBPUSD in the last four months and continues to do so.

In the last few month or so the GBPUSD has rallied well from a two month low around 1.2650 back up to 1.30 which has resisted prices strongly, before the recent moves higher to 1.3250. Around the lows, the GBPUSD also received support from another key level at 1.2650. In early September, the GBPUSD fell sharply from the nine month high near 1.35, pushing down through 1.30 which had previously supported price for a few weeks. The resistance level at 1.3250 didn’t offer much support on the way down and then the other key level at 1.30 was also broken through quite quickly. The 1.2650 level did well to support price, and allow it to rally higher and push back above the 1.30 level, and it may be called upon again to provide some support again.

Back in August, the GBPUSD consolidated in a range between 1.30 and a then five month high around 1.3250, after surge higher through two key levels of 1.2650 and 1.30. Just prior to the surge, it was meeting resistance at the key 1.2650 level, remaining within a narrow range consolidating between another key level of 1.25 and 1.2650, whilst enjoying support from the 1.25 level. Therefore it was no surprise that the 1.2650 level has offered some reasonable support in the last few weeks. In late June, the GBPUSD was well supported by another key level of 1.23 allowing it to return to back above 1.25, whilst the 1.25 level had offered some resistance during this time too.

In early June, the GBPUSD fell sharply from a then three month high above 1.28 back down below the key 1.25 level, and in doing so, it returned to the range where it has spent the best part of the last three months. Before its recent surge higher, the GBPUSD has spent the last four months consolidating around the key 1.25 level which has seen a healthy recovery from its sharp falls in early March, before its recent surge higher.

In unfortunate timing for the United Kingdom, the Brexit trade negotiations have been halted at a critical stage because a European official involved in negotiations has tested positive for the coronavirus.  The United Kingdom left the European Union on 31st January 2020 and a transition period was put in place until the end of this year, when the Europe rules apply to trade. COVID-19 put a halt to any negotiations earlier in the year so has significantly impacted progress throughout 2020.Many believe that hundreds of thousands of jobs are vulnerable if Brexit talks are not productive.  Currently, if both sides cannot reach an agreement, there will be trade tariffs imposed and other obstacles to trade between the United Kingdom and the European Union, although it is expected to hurt the UK more.  EU negotiator Michel Barnier said that in agreement with the UK, “we have decided to suspend the negotiations at our level for a short period,” due to the positive coronavirus case, however smaller negotiations will continue.  Unfortunately for negotiators, the deadline of 1st January is coming around fast and any prolonged suspension of talks makes it even more difficult, as the EU will then need approximately four weeks to approve any deal reached by negotiators.

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