GBPUSD Trades Lower As New Brexit Concerns Emerge

Summary:
• The GBPUSD is trading lower today as new Brexit concerns emerge; UK PM to amend Withdrawal Agreement Bill to block extension beyond Dec 2020.

The GBPUSD is trading lower this Tuesday after it emerged that the new Conservative government may not pursue a Brexit extension beyond December 2020. This decision was announced by the UK PM’s spokesman as he talked with reporters on Tuesday, sparking off renewed Brexit concerns.

“The Conservative election manifesto was explicit in ruling out any extension of a transition period,” the PM’s spokesman was quoted as saying.

He further added that a new UK-EU relationship was intended to begin on January 21, 2021, saying that “… we are leaving the EU customs union and single market, businesses will be prepared for that.”

The expectation of some analysts was that the UK PM would try to seek an extension to iron out a new trade deal between the UK and the EU, but apparently this is not on the cards at the moment. Rather, the Withdrawal Agreement bill is to be amended to remove the option to seek an extension beyond Dec 2020.

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Technical Outlook for GBPUSD

The bulls on the GBPUSD used this opportunity to take their feet of the pedals and the GBPUSD is now trading 1.1 % lower to 1.3143. A look at the daily chart shows the technical price levels that have formed in the last month. The GBPUSD was unable to hold on to last week’s spike, which briefly touched off the 1.3515 price level before it retreated back to the present support at 1.3175. Supporting the retreat is the divergence signal being provided by the DeMarker oscillator, which showed lower highs than the price action did last week.

Today’s daily candle is now violating this support as well, but there must be two successive daily candle closes to confirm this downside break. If the downside break is successful, we could see a return to the recent range top at 1.2995, seen between October 18 and November 19 before price broke to the upside.

On the flip side, a failed downside breach of 1.3175 keeps the GBPUSD above this level, which presents it another opportunity to target 1.3319 and possibly last week’s highs of 1.3515.