Daily Market Recap - GBPUSD On the verge of a breakdown?

The British Pound has traded mostly sideways against the US Dollar in the past week, reacting to developments in the Brexit trade deal negotiations between the UK and the EU which are now reaching their final stages.

After months of talks between the negotiating teams on either side, UK Prime Minister Johnson and EU President von der Leyen are now in direct discussions after Johnson arrived in Brussels on Wednesday evening for a last-ditch effort to bridge the divides on their future trading relationship.

Significant gaps remain present in the negotiations and it is still unclear whether a deal can be struck in the short period of time left. Wednesdays meeting between the leaders from both sides did not produce any meaningful progress towards that objective but it has set a firm “make or break” deadline for this coming Sunday. The probability that the UK will leave the EU without a deal is becoming more and more likely as the days go by.

GBPUSD bulls have been riding a wave of optimism in the past months which may start to unfurl on them in the coming days. It appears that the only way a deal will be reached between the EU and UK is if both sides are willing to compromises on key issues, which as of now seems extremely unlikely.

From a technical perspective, the GBPUSD is struggling to hold at the 1.33 mark and looks set to crash towards the 1.32 immediate support zone. Bulls may look to continue buying the dips around that level but a break below will likely accelerate the correction to the 1.31 mark which should offer meaningful support in the near term.

On the flip side, the GBPUSDs first hurdle would be to close above the 1.33 level before making a push towards the 20-day MA. As it stands, strong gains above that point seem highly unlikely in the coming sessions barring any positive development in the Brexit trade deal.

(Chart Source: Tradingview 10.12.2020)

Technical indicators suggest a move lower is on the table with both the RSI and MACD pointing lower. A bearish cross has also appeared on the daily MACD chart, suggesting a possible acceleration to the downside can be expected.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.