GBP/USD Forecast: Brexit hopes provide temporal support

Valeria Bednarik FXStreet

GBP/USD Current price: 1.2718

EU’s chief negotiator Barnier determined to get a trade deal with the UK.
Economic activity in the UK continued expanding in September, although at a slowing pace.
GBP/USD ends the day in the green, but the risk remains skewed to the downside.

The GBP/USD remained under pressure, ending the day little changed in the 1.2710 price zone, after printing a daily low of 1.2674. The pair advanced during European trading hours, on the back of Brexit-related headlines, as EU’s chief negotiator Michel Barnier said that the EU is determined to get a trade deal with the UK but will be firm. He added that the transition period ends on 31 December and that it cannot be extended.

Markit published the preliminary estimate of the UK Manufacturing PMI, which came as expected at 54.3. The services index, however, missed expectations with 55.1. Both figures resulted below the final August readings, signaling a fading economic recovery, by the time the government announced new coronavirus restrictive measures. This Thursday, the kingdom will publish the CBI Distributive Trades Survey on realized sales, foreseen at -10% from -6% in the previous month.

GBP/USD short-term technical outlook

The latest GBP/USD´s recovery seems corrective, as technical readings suggest limited buying interest. The 4-hour chart shows that technical indicators recovered from oversold readings, but resumed their declines well below their midlines. The 20 SMA, in the meantime, heads firmly lower at around 1.2810, providing dynamic resistance, while the larger ones also gain bearish traction. A steeper decline is to be expected on a break below 1.2665, a strong static support level.

Support levels: 1.2700 1.2665 1.2620

Resistance levels: 1.2780 1.2830 1.2870

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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