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GBPUSD Gains on No Deal Fears Easing

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GBPUSD Gains on No Deal Fears Easing
Independent Analyst: Thibault Moirez
Date: 15 October 2020

The British Pound recovered from a one-week low following signs that the UK is willing to continue trade negotiations with the EU after the 15th of October, a deadline previously set by Prime Minister Boris Johnson as ‘walk away’ date should an agreement not been reached yet.

The GPBUSD is up 0.74 per cent at the time of writing after initially falling below the 20-day EMA. The softened stance by the UK helped support the pair as traders welcomed the move. European Union leaders are saying that sufficient progress hasn’t been attained at the moment though reiterated its intention to continue talks in good faith.

Markets are now waiting for PM Johnson to formally announce his decision whether to end negotiations at the end of this week’s round of discussions. A source close to the matter said he felt confident a deal can still be reached soon should both sides to commit to having intense discussions in the coming days.

Analysts have now trimmed the odds of a no-deal Brexit down to 20-25% from 40% previously. Angela Merkel has called on EU leaders to adopt a more compromising approach to the contentious issue of fisheries. The EU will be holding a two-day European summit tomorrow in which we will likely get a pulse on the Brexit proceedings on their end.

From a technical perspective, the GBPUSD has bounced off firmly above the 0.786 Fibonacci retracement level at 1.28514 which should continue to provide strong resistance in the near term. Bullish momentum has resurfaced though without further clarity from PM Johnson, we are still under the threat of a no-deal scenario tomorrow. The short-term consolidation play between the 1.29 and 1.30 mark remains the soundest strategy for now.

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