- The GBP / USD pair saw some knee-jerk selling with the news that Brexit talks had been temporarily halted due to fears of a Covid-19 outbreak among negotiators.
- The pair briefly fell below the 1.3200 mark, but the buyers came back quickly and pushed the pair back to 1.3250.
- The pound appears to have broken down two key recent uptrend channels, opening the door for further losses in the future.
The pair GBP/USD It momentarily fell below 1.3200 after the EU’s chief Brexit negotiator, Michelle Barnier, announced that one of the EU’s negotiators had tested positive for Covid-19. The pair has since rallied above this level and is trading near 1.3220 again, with losses on the day of roughly 40 pips or 0.3% on the day.
Negotiation interruption should not affect the likelihood of an agreement being reached
Common sense, as well as market reaction, indicates that Thursday’s technical disruption should not have any significant impact on the likelihood that the two parties will strike a deal. However, if it turns out that a large number of traders have contracted the virus, this could make things difficult and trigger further weakness in the British pound, so this is something the markets should be on hold for.
As for the latest on the state of the negotiations before the abrupt interruption; recent reports suggest that while the two sides are negotiating more intensively than before, significant differences persist. Meanwhile, Barnier canceled briefings with EU ambassadors on Tuesday evening and Wednesday noon, and the BBC political correspondent said this is “perhaps a good sign that negotiators are overcoming obstacles to an agreement”.
GBP / USD breaking down from recent uptrend lines
GBP / USD appears to have broken down from two recent major bullish trend lines; Towards the end of the US session on Wednesday, the pair broke below the trend line linking the lows of November 12, 16 and 17. On Thursday, the pair appears to have moved below the uptrend linking the lows of November 2, 4, 5 and 13.
Therefore, the short-term technical outlook for GBP / USD now looks more mixed / less optimistic than before. If the recent decline continues and the pair breaks below 1.3200, the door is open for a run towards 1.3150 (lows of the November 13 US session) and then the 1.3100 level, which matches nicely with the lows of November 12 and the pair’s 21-day moving average.
4 hour chart
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