Brexit warning weighs on GBPUSD

With just under three weeks left until the end of the 11 month transition period, and with “very large gaps” remaining including the EU’s demand that the UK follow future changes in the EU's rules, Johnson's warning has heightened Brexit anxiety.

Although discussions are scheduled to continue until Sunday, Johnson said “There’s now the strong possibility we will have a solution that's much more like an Australian relationship with the EU than a Canadian relationship with the EU.” An inference that the UK would fall back on the rules of the WTO and face tariffs as well as quotas when the transition period ends on December 31st.

Whether the latest developments confirm the probability that a no-deal Brexit has increased, or rather is the latest instalment in brinkmanship aimed to foster compromise, GBP/USD has fallen back towards 1.3300 at the time of writing.

The latest setback in GBP/USD leaves last week's 1.3540 high outstanding as another failed attempt to break the cluster of resistance 1.3480/1.3520 that includes several highs since June 2018 and also picks up the January 2009 low of 1.3503. This resistance band is ultimately favoured to give way in due course.

Trendline support from the March 2012, 1.1411 low is viewed towards 1.3100 and is expected to attract buyers - more so given a disorderly Brexit is off the table after the withdrawal of controversial clauses in the Internal Markets Bill.

However, should GBP/USD see a sustained break of the 1.3100 support level, there is room for the decline to extend towards a band of support 1.2750/1.2675 coming from the 200-day ma and the September 1.2675 low.

Source Tradingview. The figures stated areas of the 11th of December 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.