GBP/USD Breaking Below Double Bottom – A Sell Signal Update!
Arslan Butt • 3 min read
The GBP/USD pair closed at 1.3303, after placing a high of 1.34453 and a low of 1.32901. On Monday, the GBP/USD pair extended its losses for the 3rd consecutive day, due to reports of difficulties in the Brexit talks. On Monday, the British Pound rose in the early trading session, because of the weakness of the US dollar and positive headlines related to Brexit. However, the gains in the GBP/USD pair failed to continue, as fears of Brexit difficulties emerged in the market.
The European Union’s chief Brexit negotiator, Michel Barnier, said that two conditions remained unresolved in the Brexit trade negotiations, as the talks extended beyond Sunday’s deadline. Barnier said that he still believed that a post-Brexit trade agreement was possible, as talks between the EU and the UK resumed in Brussels.
Barnier said that after the final round of talks, the key issues that had blocked the deal had been reduced from three to two, namely fair competition rules and fishing rights. Meanwhile, the tone from the UK government was also positive after the talks. The UK Business Secretary, Alok Sharma, said the fact that the UK and the EU were still discussing the matters showed that there was an opportunity to attemot to make some progress. He added that their intention was not to walk away. He said that the UK would continue to talk as long as there was a possibility of reaching a deal.
This optimism took the British Pound higher on the board and helped the GBP/USD to post gains in the early trading session on Monday. The rise in the GBP/USD pair was also due to the weakness of the US dollar. The greenback was weak across the board, as the rising number of coronavirus cases and the death toll have reached record highs.
On Monday, the US death toll from the coronavirus surpassed 300,000, putting pressure on Congress to further aid the economy. On Monday, Congress introduced a bipartisan stimulus package of $ 908 billion, split into two bills. The hopes for global economic recovery were boosted as optimism surrounding the second round of stimulus from Congress increased and supported the risk sentiment, ultimately putting pressure on the US dollar and supporting the upward trend in the GBP/USD pair in the early trading session.
However, the gains in the GBP/USD pair reversed in the late trading session, as the reports about a lack of progress on post-Brexit talks cooled the renewed optimism among investors, that a deal could still be reached within the 17 days until the end of the Brexit transition period.
The talks on Sunday failed to break the agreement between the EU and the UK. The new deadline for talks, which will be resumed in Brussels on Tuesday, has not been set, as the clock is continuously ticking towards the final deadline of December 31, when the transition period will end.
The latest update on Brexit negotiations suggested that the early-day optimism might have been misplaced, as talks remain difficult, amid the lack of progress in recent discussions between PM Boris Johnson and EU Commission President Ursula von der Leyen. These faded hopes that the impasse can be broken and a deal can be reached between the EU and the UK in just 17 days, put pressure on British Pound, causing a drop in the pair GBP/USD on Monday.
Daily Technical Levels
Pivot Point: 1.3348
The GBP/USD is trading at the 1.3303 level, having violated the double bottom support area of 1.3303, and now it is heading towards the 1.327 level. The MACD is also dropping below 0, which suggests a selling trend in the market. Therefore, we have opened a selling trade in Sterling. Good luck!