It has been the same old story with Brexit over the past few months, with the clock dangerously ticking to a year-end deadline for a new post-Brexit deal to replace almost 50 years of integration.
After officially leaving the European Union (EU) almost 6 months ago, uncertainty remains the name of the game as both sides struggle to make headway on Britain’s future relationship with Europe.
The sixth round of Brexit talks resumes today after the previous disappointment. Sterling may be flung into the direct firing line if the United Kingdom and Europe and unable to bridge their difference on EU’s access to British fishing waters and the UK’s alignment to EU rules.
If you are looking for some action and volatility, Pound crosses could be the place to be amid fears around an extended deadlock leading to a no-deal Brexit outcome by the end of 2020.
The GBPUSD continues to ride higher on Dollar weakness with prices slamming into the 1.2670 resistance level.
Yesterday’s rebound from the 1.2550 support levels looks strong, with the daily close above1.2650 signalling further upside in the short to medium term. Technical lagging indicators like the 50 & 100 Simple Moving Average support the upside bias while the Moving Average Convergence Divergence (MACD) has also crossed to the upside. The current bullish momentum may send the GBPUSD towards 1.2750. Alternatively, a move back towards 1.2550 suggests that a technical correction could be in play before prices rebound higher.
GBPJPY clears 136.00
The GBPJPY entered the week on a solid note, jumping over 150 pips to clear the 136.00 resistance level. This currency pair is turning bullish on the daily charts with 137.00 acting as the next level of interest.
As the market mood improves on coronavirus vaccine hopes and EU leaders striking a deal on a landmark recovery fund, safe-haven assets like the Japanese Yen are likely to weaken. The GBPJPY is likely to ride higher on Yen weakness in the short term, with a breakout above 137.00 opening the doors towards 138.50.
On the other hand, this party could be crashed by bears if Brexit talks fall apart this week. A move back below 135.00 may inspire a decline towards 133.60 and 134.00.
EURGBP slips towards 0.9000
According to the technicals, the EURGBP is still bullish on the daily charts.
There have been consistently higher highs and higher lows while the Moving Average Convergence Divergence (MACD) trades to the upside. However, prices are trading below the 20 Simple Moving Average. A breakdown below the 0.9000 support level could signal a decline towards 0.8850. If 0.9000 proves to be reliable support, the EURGBP has the potential to rebound towards 0.9100.
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