GBP/USD Technical Analysis: Post-Brexit Negotiations Determine the Fate

Mahmoud Abdallah
Mahmoud Abdallah
on February 26, 2020 | Updated On Feb 26, 2020

Shy gains amid stronger pressure on the Pound pushed the GBP/USD pair towards the 1.3017 resistance during yesterday's trading before settling around 1.2995 at the time of writing. The British currency is still facing an unknown fate due to trade negotiations between the two sides of Brexit, the European Union and Britain, which will start in March and which is set to end by the end of 2020, as desired by the British government. Markets are currently focusing on the continued spread of the Corunavirus outside China, including Europe. And investors usually give up stocks and commodities while bidding for safer assets such as government bonds, as is the case this week, a pattern that supports the British pound. As the Pound is the only currency among the five traditional "major" currencies enjoying short-term bond yields above the zero level.

The European Council has set its goals for the Brexit negotiations, which have confirmed that the bloc will ask the UK government for the content of any new laws on “state aid, competition, state-owned institutions, social standards, employment, environmental standards, climate change, related tax matters and other regulatory measures,” to match them with Brussels’ standards after it was supposed to have regained its independence from the bloc by the end of the year.

European Union leaders have neglected to use the term “alignment” explicitly although this is required only days before the UK government determines its position before the talks, which are due to start next month. Before the two parties have until the end of June to reach an agreement or extend the transitional period beyond December 31, 2020. Some analysts expect that in this turbulent environment, pressure will increase on the British pound.

The Brexit Agreement concluded by Prime Minister Boris Johnson leads to potential constitutional consequences for all of the United Kingdom, especially Northern Ireland, in the case of "backstop", although this does not completely eliminate the possibility of something like Britain leaving the European Union with "no deal" in 2021. Markets and traders are waiting for the fiscal stimulus figures in the March 11 budget, which will provide support to the Pound in the short term.

According to the technical analysis of the pair: The correction attempts of the GBP/USD lack the incentives to rush strongly, and as is our expectation, there will not be a strong reversal of the general trend of this pair without testing the 1.3300 resistance. Stability above 1.30 is a new opportunity for a bullish advance. In the long term, the pair remains bearish, and moving below the 1.2900 support, gives the bears the control back. I still prefer to sell the pair from every upside level.

As for the economic calendar data: The focus will be on US data; new home sales and oil inventories.

GBP/USD

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About the Author
Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.
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