GBP/USD: Pound Sterling Continues to Grind as Brexit Clock Ticks

Summary:

The GBP/USD continued to grind in the Asian session as the Brexit clock continued to tick. What next for the pound sterling?

The GBP/USD pair is wavering today as investors take stock about the Brexit situation. Today, the focus will remain on Brexit and the important services and composite PMI data set for 09:30. Also, pound sterling traders will focus on the overall weakness of the US dollar. This is after the dollar index crashed to the lowest level since April 2018 yesterday.

In a statement yesterday, Michel Barnier, the chief EU negotiator warned that the next 36 hours will be crucial for Brexit. He even made several phone calls to EU leaders asking them to prepare for a no-deal Brexit.

This happened as significant gaps about the future relationship between the EU and the UK remained. Also, according to The Guardian, the UK has already made some concessions about fishing rights, which has become a key contentious issue. In his new proposal, the UK will ask the EU to return 60% of value of stock it takes from UK waters. That’s still significantly higher than less than 20% that the EU is prepared to offer.

In addition to Brexit, the GBP/USD will today react to the services PMI data from the UK. Economists expect the data will show that the PMI dropped to 45.8 in November while the composite PMI fell to 47.4. That decline will be because of the recent shutdowns in the UK.

Most important, the pound sterling will react to the struggling dollar. The dollar crashed to a multi-year low and analysts believe that the situation will worsen before it gets better.

GBP/USD technical outlook

On the four-hour chart, we see that the GBP to USD pair has bounced back from yesterday’s low of 1.3285. That price was along the ascending trendline that connects the lowest levels in November. It is also supported by the 100-day and 50-day exponential moving averages.

Therefore, I suspect that the pair will continue rising today, with the next target being at 1.3443. For this trade, the invalidation point is 1.3285, which is the lowest level yesterday.