GBP/USD Technical Analysis: A Rapid Collapse of Gains

I certainly expected that the gains of the British pound following the monetary policy decisions of the Bank of England and the joy of Brexit will not last long, and indeed the price of the GBP/USD pair move based on those factors to the 1.3209 resistance during last Friday’s trading session. In the beginning of this week’s trading, the pair fell to the 1.2982 support before settling around 1.3015 at the time of writing. This is with renewed fears, as I expected, that negotiations between the two sides of Brexit in the transitional period will not be easy, and thus will increase the pressure on the pound again.

British Prime Minister Boris Johnson sent a strongly-worded letter to Brussels three days after Britain left the bloc, in a speech to international business leaders and diplomats in London, Johnson said, “We want a free trade agreement” – but not at any cost. He added, “I do not see a need to link ourselves with an agreement with the European Union,” insisting that Britain “will restore full sovereign control” over its borders, bases and economy.

On the other hand, the chief negotiator in the European Union, Michel Barnier, was equally assured that the remaining 27 countries in the European Union would not agree to any British trade deal only to avoid a costly and chaotic “no deal” Brexit in the beginning of 2021, in the event of a transition after 11 months from Briext. Barnier added: “We support free trade, but we will not be naive.” And added “If the demand is broad access to a market with 450 million European consumers, without customs duties or zero quotas – it will not happen for nothing, or in any kind of circumstances.”

It seems that each party wants to pressure the other to get more concessions and the best deals in its favor, which is expected, and thus the volatility of the British performance against the other major currencies will increase.

Britain aims to have a “Canadian-style” free trade agreement with the European Union, which would eliminate almost all tariffs and cover both goods and services. But it is clear that they will not agree to follow the entire EU rules book in exchange for unrestricted trade because they want to be free to conclude new deals around the world. The bloc insists that no trade deal can be concluded unless Britain agrees to a “level playing field” and does not undermine EU regulations, especially when it comes to the environment, labor rights and health and safety standards.

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According to the technical analysis of the pair: the price of the GBP/USD pair remains in the range of its declining channel with the support of stability below the 1.3000 psychological support, which stimulates the bear’s control over the performance. At the present time, the closest support levels for the pair are currently at 1.2955, 1.2880 and 1.2800 and the last two levels can be buying levels with no risk and with close goals. And there will not be a reverse of the general trend to bullish without the pair moving towards 1.3300 and I am still prefer stress that the pair will remain in a long-term selling position and it is preferable to sell from every bullish level.

As for the economic agenda data: From Britain, the PMI for construction will be announced, and from the United States, factory orders will be announced.

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