GBP/USD Update 29 March 2020
- Cable is moving in a consolidative state, with a slight bearish tone.
- The is UK facing continued pressure to achieve a Brexit deal with the EU.
As discussed in the recent GBP/USD brief (27/04/2020), prices are still moving within the rising wedge structure. Currently prices have rejected from the 200-day EMA three times on the 4-hour timeframe, it is clear that this level of support is proving to be a barrier.
Prices need to break and close below the 200-day EMA at around 1.24220 in order to see further downside, if this is achieved it is likely prices will fall further towards the lower trendline support of the rising wedge structure.
The previous daily candle closed as a bearish inverted hammer; this could be an early indication of selling pressure to come however weakness in the dollar index continues to cap any real downside on this pair. A clear break above 100 on the dollar index should trigger selling pressure in cable.
The UK has been under continued pressure to negotiate a Brexit deal with the EU. UK cabinet officer minister Michael Gove had released a frustrated statement citing that the EU were not treating the UK like a sovereign state. In areas such as fishing, the EU is asking more from the UK than it is with other independent countries. This has been deemed as ‘unacceptable’.
The EU have said that the reality of this negotiation is one market containing 66 million customers against the EU’s 450 million. It is clear that the EU are leveraging their bigger market size to assert unfair terms in this Brexit negotiation.
It is unclear as to how this situation will progress with both sides remaining unchanged in their negotiating stances. This uncertainty can weight on cable.