- GBP / USD remains under some selling pressure for the sixth day in a row on Wednesday.
- Brexit issues and nervousness over COVID-19 continue to weigh on the British pound amid a sustained dollar strength.
- Weakness below yesterday’s lows will set the stage for an extension of the decline.
The pair GBP/USD remains on the defensive during Wednesday’s European session, staying near the lower end of its intraday trading range around the 1.3600 level.
The pair has struggled to capitalize on the rebound of the previous day, from the lowest level since February 4, and is moving lower for the fifth day in a row on Wednesday. This also marks the seventh day of negative movement in the previous eight and it is due to a combination of factors.
The Impasse on the Northern Ireland Protocol to the Brexit deal It has soured ties between the UK and the European Union in recent months. This, along with the resurgence of covid-19 infections in the UK, has acted as a headwind for the British pound and put pressure on the GBP / USD pair.
The UK’s chief Brexit negotiator David Frost said on Monday that the protocol is not sustainable in its current form and that all options remain on the table to solve the problem. Frost will unveil the government’s proposals for post-Brexit deals for Northern Ireland on Wednesday.
Meanwhile, COVID-19 cases are increasing by more than 50,000 a day in the UK and Hundreds of thousands of Britons are asked to self-isolate for 10 days. This, along with the sustained buying interest around the US dollar, has contributed to the weaker tone surrounding the GBP / USD pair.
From a technical perspective, this week’s sustained break below the very important 200-day SMA, for the first time since July 2020, it might have already set the stage for a further fall. That said, the bulls, so far, have been showing some resilience below the 1.3600 level.
Also, there are no major economic data releases on Wednesday, neither from the UK nor the US. This makes it prudent to wait for some continuation selling below yesterday’s lows, around the 1.3570 region, before positioning for any further declines.