GBP/USD Forecast: UK-EU trade negotiations loom

GBP/USD Current Price: 1.2962

  • UK Markit Manufacturing PMI surprised at 51.9 in February.
  • The UK and the EU will begin trade talks next March, Brexit back in the spotlight.
  • GBP/USD bullish potential limited ahead of the critical 1.3000 threshold.

The GBP/USD pair continued to recover on Friday, after bottoming early Thursday at a fresh 2020 low of 1.2848. The pair settled around 1.2960, still down for the week. The Pound found support during London trading hours in the preliminary Markit Manufacturing PMI for February, which came in at 51.9, beating the market’s expectation of 49.7 and above the previous 50. The rally continued as US output, on the contrary, contracted for the first time in over six years. UK data has been resilient as of late, while Brexit-related concerns have been set temporarily aside. The market could start worrying about the future UK-EU relationship in March when negotiations are set to begin.

Meanwhile, the greenback can take advantage of its British counterpart on the back of coronavirus concerns, should news indicate the outbreak expands in the upcoming days. This Monday, the UK is set to release BBA Mortgage Approvals for January, previously at 46,815K.

GBP/USD short-term technical outlook

The GBP/USD pair has a limited bullish potential according to the daily chart, as it finished the week below a bearish 20 DMA and around a mild-bullish 100 DMA. Technical indicators in the mentioned chart have recovered, but remain within negative levels. In the 4-hour chart, the pair is trading above a bearish 20 SMA but below the larger ones, which also maintain their downward slopes. The Momentum indicator remains below its mid-line, losing bullish strength, while the RSI retreats within neutral levels, all of which suggest a limited buying interest near the critical 1.3000 threshold.  

Support levels: 1.2915 1.2880 1.2845

Resistance levels: 1.3000 1.3035 1.3070

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