GBP/USD Forecast: Brexit and coronavirus to hit the pound

Valeria Bednarik FXStreet

GBP/USD Current price: 1.3493

UK PM Boris Johnson announced tier-four restrictions for London and Southeast England.
Brexit talks stuck over differences in fisheries and a level playing field.
GBP/USD shows no signs of an upcoming decline, but Brexit rules.

The GBP/USD pair fell to 1.3407 on Friday, retreating further from the year’s peak at 1.3624. The pair recovered roughly 100 pips ahead of the daily close, ending the week with substantial gains. The pound’s behavior is dictated by Brexit-related headlines, as negotiations continue with a few days to go to the final deadline. Market players are hoping a decision will be made this week ahead of Christmas, although weekend news seem discouraging as trade talks are still stuck. Differences remain not only around fisheries but also on the level playing field.

On Saturday, UK Prime Minister Boris Johnson moved London and areas of Southeast England into tier-four level of restrictions, amid a new variant of the coronavirus, which seems to be much more contagious. Johnson said that there’s no reason to believe the vaccine will be any less effective against it. Still, discouraging news may push sterling lower at the weekly opening. The UK won’t publish macroeconomic data this Monday.

GBP/USD short-term technical outlook

The GBP/USD pair is losing bullish potential but remains far from bearish, according to the daily chart. In the mentioned time-frame, technical indicators have turned modestly lower but hold near weekly highs. The 20 SMA keeps advancing below the current level and above the longer ones, reflecting buyers’ conviction. In the 4-hour chart, the pair is seesawing around a bullish 20 SMA, while technical indicators corrected extreme overbought conditions to pare their slumps within neutral levels.

Support levels: 1.3485 1.3430 1.3370

Resistance levels: 1.3540 1.3590 1.3640

View Live Chart for the GBP/USD

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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