All Eyes On Brexit Negotiations
GBP/USD is trying to settle below 1.2900 as traders are waiting for more clarity on Brexit while the U.S. dollar is mostly flat against a broad basket of currencies.
The U.S. Dollar Index managed to get above the 20 EMA at 93.55 and is trying to gain additional upside momentum. The next resistance level for the U.S. Dollar Index is located at the 50 EMA at 93.75. If the U.S. Dollar Index moves towards this resistance level, GBP/USD will find itself under pressure.
UK Prime Minister Boris Johnson has previously set an October 15 deadline for the Brexit deal so traders should expect that GBP/USD will be very volatile in the next few days.
Yesterday, Johnson told his ministers that he wanted a deal with the EU on the right terms. He also added that he was prepared to move forward with an Australian-style deal. Australia’s trade with the EU is based on World Trade Organization terms.
In recent weeks, the British pound was gaining ground against the U.S. dollar because traders believed that chances of a deal between UK and EU were increasing. In case the market starts to price in a no-deal scenario, GBP/USD will likely find itself under significant pressure. A no-deal Brexit will also put pressure on EUR/USD.
GBP/USD gained material downside momentum and is trying to get below 1.2900. The nearest support level for GBP/USD is located at 1.2890.
If GBP/USD moves below this support level, it will gain additional downside momentum and head towards the next support at 1.2815.
A move below the support at 1.2815 will open the way to the test of the next support level at 1.2780.
On the upside, the nearest resistance for GBP/USD is located at the 50 EMA at 1.2945. If GBP/USD manages to settle above the 50 EMA, it will gain upside momentum and head towards the next resistance level at 1.3000.
The resistance at 1.3000 may once again serve as a material obstacle on the way up for GBP/USD. If GBP/USD moves above this level, it will head towards the recent highs near 1.3085.
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