Search ForexCrunch
  • GBP/USD has dropped another 0.86% on Tuesday but found some relief at 1.30.
  • The level has been used in the past and a Fib level is close by.

Fundamental backdrop – More tough Brexit negotiations to come

The tough talk from the UK keeps coming as on Monday UK PM Boris Johnson stated if a deal is not reached by the middle of October both sides might as well prepare for a “no-deal Brexit”. Just today the European Parliament President Sassoli stated he is worried about the lack of progress in the talks. All of this is in the backdrop of the UK potentially breaching international law on some changes to the Northern Ireland legislation. We will find out tomorrow if the rumours are correct on that front. A few hours ago the market heard from UK PM Johnson’s spokesman who said: “We do think a deal is still possible but we need to see some more realism from the EU”. He went on to say that the UK needs to make sure that Northern Ireland being part of UK’s customs territory is not compromised. The UK will be waiting for the bill that is coming out tonight but the internal market paper will be presented at the House of Commons tomorrow and then GBP traders will get more clarity.

GBP/USD 4-hour chart

Looking at the chart, the price has now found some support ahead of the 1.30 psychological level. The market is still in an uptrend and the 1.30 level is very close to the consolidation low and this means it has not been broken yet to make a new wave low. 

Now there is the possibility the price might make a new lower high before the support is broken. This will then create a lower high lower low pattern if the theory plays out. Potential resistance levels are at the green line near 1.3225 and the internal trendline marked in purple. 

Lastly, the indicators are understandably in a very bearish position at the moment. The Relative Strength Index is in the oversold area and the MACD histogram is firmly in the red. The MACD lines are looking very extended but they are not yet near crossing over. At the moment due to the extended nature of the move down and the oversold indicators we may see a small pullback before the underlying move continues.

GBP/USD Brexit Analysis