GBP/USD Forecast: Brexit jitters weighed on Sterling

Valeria Bednarik FXStreet

GBP/USD Current price: 1.2252

The UK insisted it’s not willing to extend the transition period beyond December 31.
An upbeat market mood kept the greenback under pressure, saving the day for GBP/USD.
GBP/USD retreated sharply from its recent highs, risk of a steeper decline limited.

Risk-appetite fell short of keeping the Pound afloat, hurt by Brexit jitters. The GBP/USD pair peaked for the day at 1.2353 but collapsed on Brexit-related headlines, which sent the pair to 1.2203. According to PM Johnson’s spokesman, the UK has no will to extend the transition period beyond December 31. The EU and the UK have been on talks to try to come out with a deal for this post-transition period, but so far, they have made no progress. A new round of talks will start next week, ahead of a crucial EU meeting, where the matter will be discussed.

Meanwhile, the market’s sentiment remained upbeat, underpinned by the announcement of yet another EU stimulus program to counter the coronavirus effect on the economies. The UK won’t release relevant data this Thursday.

GBP/USD short-term technical outlook

The GBP/USD pair bounced from the mentioned low to stabilise around 1.2250. The short-term picture for the pair shows increased chances of another leg lower, as the 4-hour chart shows that the pair retreated sharply from around its 200 SMA. It’s now battling with to remain above a mild-bullish 20 SMA, while technical indicators corrected extreme overbought conditions, the Momentum holding within positive levels but the RSI currently at around 48. The bearish pressure will likely increase on a break below 1.2200.

Support levels: 1.2200 1.2160 1.2115

Resistance levels: 1.2285 1.2330 1.2365

View Live Chart for the GBP/USD

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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