GBP/USD Quiet Ahead Of Brexit Day - Forex News by FX Leaders

GBP/USD Quiet Ahead Of Brexit Day

Posted Tuesday, January 28, 2020 by
Shain Vernier • 2 min read

At 23:01 GMT on 31 January 2020, the United Kingdom will no longer be a part of the European Union. Following 3 ½ years of debate, negotiations, and political tumult, the U.K. will officially leave the role call of E.U. nations. For the time being, the GBP/USD is showing little interest. 

While uncertainty generally destabilizes financial markets, it isn’t always a bad thing. Currently, the potential for unilateral U.S./U.K. trade appears to be increasing. The BBC is reporting that the U.S. is eager to sign a post-Brexit trade deal with the U.K. by year’s end. Last weekend, U.S. Treasury Secretary Stephen Mnuchin was in London, expressing optimism over a potential deal. As stated by Mnuchin, “the U.K. and U.S. have very similar economies with a big focus on services, and I think this will be a very important relationship.”

For now, the GBP/USD remains in consolidation. Let’s take a look at the weekly chart and gain some perspective on the intermediate-term technical outlook.

GBP/USD Holds Firm Ahead Of Brexit Day

Since last September, the GBP/USD has been on a fairly steep uptrend. As we roll toward Brexit Day, a long-side bias is warranted. Rates are above the 38% Fibonacci Retracement level (1.2919), confirming the validity of the bullish trend.

GBP/USD, Weekly Chart
GBP/USD, Weekly Chart

Here are the intermediate-term levels to watch for the GBP/USD until Friday’s closing bell:

  • Resistance(1): 2020 High, 1.3514
  • 2-Way Catalyst: Weekly SMA, 1.3034
  • Support(1): 38% Current Wave, 1.2919
  • Support(2): Bollinger MP, 1.2773

Overview: What is one to think about the future of U.S./U.K. trade? Honestly, the picture is murky at best. The ratification of any long-term deal will have to run through the embattled Trump White House. Although the odds of Trump being removed from office are still only about 10%, the outcome of November’s election is a big unknown. 

Although uncertainties surrounding the Brexit transition are now mitigated, fresh ones are on the horizon. Unless we see a comprehensive U.S./U.K. trade deal signed by mid-summer, it will likely have to wait until Q1 2021. Or, should the U.S. undergo a 2021 regime change, all bets on U.S./U.K. trade are off.

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About the author

Shain Vernier // US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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