GBP/USD Daily Forecast – Fears Of No-Deal Brexit Put Pressure On British Pound

GBP/USD Video 07.09.20.

U.S. Dollar Gains More Ground Against British Pound

GBP/USD  is trying to settle below the 20 EMA at 1.3220 amid risks of a no-deal Brexit.

On Monday, UK Prime Minister Boris Johnson is expected to say that Britain has set a firm deadline of October 15 to reach a deal with the EU. If UK and EU fail to reach consensus, they should “accept that and move on”.

In this case, UK’s trade relations with the EU will be similar to Australia’s. The current UK leadership believes that it’s an acceptable scenario but the markets are worried about a potential hit to the UK economy which is trying to rebound after the huge blow dealt by the coronavirus pandemic.

In addition to Brexit problems, UK has just reported its biggest daily increase in the number of new coronavirus cases since May. While the disease is mostly spreading among younger people and the number of hospitalizations remains low, this development increases risks of new virus containment measures.

Meanwhile, the U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, continues its attempts to settle above the key 93 level.

If the U.S. Dollar Index moves above the 93 level, it will likely gain more upside momentum which would be bearish for GBP/USD.

Technical Analysis

GBP/USD gained significant downside momentum and is trying to settle below the 20 EMA at 1.3220. The next support level for GBP/USD is located at the recent lows at 1.3175.

If GBP/USD moves below this level, it will head towards the next material support level at 1.3110.

On the upside, the previous support level at 1.3270 will likely serve as the nearest resistance for GBP/USD. Recently, GBP/USD made an attempt to stabilize near this level but did not manage to find enough support. I’d expect strong interest from traders in case GBP/USD gets back to 1.3270.

If GBP/USD manages to settle above 1.3270, it will gain upside momentum and head towards the next resistance level at 1.3425. No material levels were formed between 1.3270 and 1.3425 so this move may be fast.

For a look at all of today’s economic events, check out our economic calendar.