Bears Expect a Sustained Breakout Below 1.3000 Level

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  • GBP / USD falls into negative territory for the fourth day in a row.
  • Brexit-related uncertainties weigh on the GBP and put some pressure on the pair.
  • The appearance of some new purchases around the USD further contributes to the intraday decline.

The pair GBP/USD has fallen to the lower end of its daily range at the start of Tuesday’s European session, with bears making a new attempt to extend the drop below the key psychological level of 1.3000.

The pair has struggled to capitalize on its positive intraday move and has encountered new sales near the 1.3045 region, now returning to negative territory for the fourth day in a row. Lingering Brexit-related uncertainties have prevented GBP bulls from opening aggressive positions and limited any significant gains for the GBP / USD pair.

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In the latest development, the EU’s chief Brexit negotiator, Michel Barnier, has extended his stay in London until Wednesday. This has been described as “a very good sign” by Northern Ireland Secretary Brandon Lewis and has raised hopes for a last minute Brexit trade deal. Investors, however, remain skeptical of a deal amid differences on key points.

Furthermore, the increasing concerns about the possible economic impact of the new lockdown measures to curb the second wave of coronavirus in the UK have further affected the British pound. This, coupled with a rebound in emergence of new purchases around the US dollar, has put some pressure on the GBP / USD pair and contributed to the current slide.

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The continued rise in COVID-19 cases, along with the slow progress of stimulus talks in the United States, has clouded market sentiment. This was evident by a sharp drop in US equity markets on Monday, which in turn benefited the USD as a global reserve currency. That said, the uncertain political environment in the US could constrain the US dollar and extend some support to the GBP / USD pair.

There is no major economic data release in the UK on Tuesday. Therefore, incoming Brexit related news will play a key role in influencing sentiment around the British pound. Later, at the start of the American session, the release of US durable goods orders data could generate some short-term business opportunities.

Credits: Forex Street

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