GBP/USD pares earlier gains and returns below 1.2950

Sterling’s rebound from 1.2910 area has been limited below session highs at 1.2980, and the pair retreated again to the lower rage of 1.2900. The poun  |  20/10/2020 18:12
  • GBP/USD's upside attempt has been capped at 1.2975.
  • The pound remains flat on the day with all eyes on Brexit developments.
  • GBP/USD seen on a defensive mode below 1.3050 - UOB.

Sterling’s rebound from 1.2910 area has been limited below session highs at  1.2980, and the pair retreated again to the lower rage of 1.2900. The pound remains practically unchanged on the day, with the markets awaiting a breakthrough in the Brexit negotiations between the UK and the EU.

Brexit remains the main GBP mover

Cable appreciated earlier today as the market mood improved and the European Commission released a Statement showing their willingness to intensify trade talks with the UK. This boosted market confidence about a last-minute deal sending the GBP to 1.2975 area.

Investors, however, are extremely cautious in regards to GBP long positions with the Brexit negotiations at a standstill. UK Prime Minister, Boris Johnson affirmed this weekend that there is no point on resuming the talks unless Brussels adopts a “fundamental change of approach” and called to prepare for an Australian-style no-deal exit from the Union, which has dampened hopes of a trade agreement.

GBP/USD likely to remain on a defensive mode below 1.3050 - UOB

On the technical domain, the FX analysis team at UOB expects the pair to continue trading between 1.2845 and 1.3050over the next weeks::  “Last Friday (16 Oct, spot at 1.2905), we held the view that GBP “is likely to trade on a slightly defensive mode with 1.3050 acting as a strong resistance”. GBP rose to a high of 1.3024 yesterday (19 Oct) and while downward pressure has eased, only a break of 1.3050 would indicate that GBP is not ready to test the major support at 1.2845. In other words, there is no change in our view for now. That said, in order to rejuvenate the current flagging momentum, GBP has to move and stay below 1.2900 within these 1 to 2 days or the odds for a test of 1.2845 would diminish quickly.”

Technical levels to watch

 

 

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