GBP/USD: More chances of further downside after deadlock at dinner

GBP/USD is on the back foot after the Brussels’ Brexit dinner failed to yield a breakthrough. Ongoing talks, now set to extend through Sunday, overshadow US fiscal stimulus and virus developments, FXStreet’s Analyst Yohay Elam reports. 

Key quotes

“UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen failed to reach a much desired Brexit breakthrough over a three-course dinner. After concluding that they remain ‘far apart’, the EU and the UK agreed to extend talks until the end of the weekend.”

“Failing to reach a deal three weeks before the transition expires is an adverse development for the pound. Contingency plans for a no-deal exit are likely to grab the headlines, further weighing on sentiment. The fact that investors will be unable to react to a Sunday statement may cause some to take bets off the table. Fear of another deadlock could prompt a run against the pound.”

“Republicans and Democrats seem to coalesce around the framework – $900 billion – but not about the details. Nevertheless, there seems to be more optimism in Washington than in Brussels.” 

“The US Food and Drugs Administration is on course to greenlight the Pfizer/BioNTech vaccine for use on Thursday, following the UK, which is already administering the shots. An FDA approval, even if expected, may give a shot in the arm to markets after Wednesday’s down day.”

“Cable has recaptured the 100 Simple Moving Average on the 4-hour chart but trades under the 50 SMA. Momentum is to the downside while the Relative Strength Index is stable.”

“Some support awaits at 1.3320, which was a swing low on Wednesday. It is followed by 1.3290, a stepping stone on the way up earlier in the week. Some resistance is at 1.3385, where the 50 SMA hits the price, followed by 1.3410, the daily high.”