Brexit and trade weigh on GBP/USD

May 8, 2019 Off By admin-445
  • GBP/USD is on the back foot as both trade and Brexit talks have stalled.
  • New developments on both fronts are awaited.
  • The technical picture is worsening for the pair.

These are not happy days for . Cable is trading in the mid-1.3000s, struggling to recover recent losses as the mood has worsened as both  and trade talks have stalled.

Starting with the UK’s exit from the EU, negotiations between the government and the opposition have not yielded results. Both sides have expressed pessimism and await a breakthrough. Britain’s participation in the EU’s customs union remains the sticking point in these cross-party talks.

De-facto deputy PM David Lidington confirmed that the UK would participate in the European Parliament elections later this month. The government aims to leave the bloc by July 2nd before the new MEPs take their seats. The delay in the government’s aspirations goes hand in hand with the impasse in talks.

PM Theresa May is under growing pressure to step down, or at least set a timeline for doing so. Some of her colleagues at the Conservative Party want her out but have yet to agree on a successor, with many aspiring to inherit her at 10 Downing Street.

On the other side of the Atlantic, the US awaits a high-level Chinese delegation on Thursday for high-stakes trade talks. A crisis broke out on the weekend after Trump threatened to impose new tariffs on China on Friday. His angry tweets blamed China for backing down on commitments made in the negotiations between the world’s largest economies. Global stock markets are suffering, and GBP/USD also struggles amid the risk-off atmosphere.

So far, pound/dollar seems to be more influenced by Brexit than by trade. In any case, these two topics are set to dominate trading today, especially as the  remains light.

GBP/USD Technical Analysis

Momentum on the four-hour chart is flat, and the Relative Strength Index is broadly balanced. The currency pair slipped below the 100 Simple Moving Average and is struggling with the 50 SMA. All in all, the outlook is getting worse.

Immediate support is at 1.3035 which is where the 50 SMA meets the price. The swing low of 1.2990 seen in early May is next and is closely followed by 1.2960, the trough in March. 1.2920 and 1.2870 follow.

1.3080 that capped cable earlier this week works as initial resistance. 1.3130 was a swing high and serves as the next limit. The May peak of 1.3180 and the round number of 1.3200 are next.