Pound Slips as Fears of No-Deal Brexit Overtake Post-Election Optimism

Sterling has depreciated against every single G10 currency this week following plans from Boris Johnson to make it illegal for the UK Government to extend the transition period of Brexit beyond 2020. The recent announcement from Boris Johnson has raised concerns over Britain leaving the European Union by the end of 2020 with no deal in place.

It must be kept in mind that Johnson’s decision to block an extension of the Brexit transition period will not only limit the trade deal options for the UK, but potentially take UK out of the EU without a deal, reverting to WTO trade rules, which makes it more burdensome for businesses and the UK economy.

A landslide victory for Boris Johnson in the UK general elections gave the British Pound a much-needed boost, with Sterling jumped above 1.35000 against the US Dollar on December 13. Post-election optimism came in hopes that a clear majority Conservative win would remove uncertainty regarding Brexit.

Pound also reached the highest level in more than three years against the Euro. But the optimism proved to be short-lived as the GBPUSD tumbled more than 400 pips this week after concerns on possibility of a hard-Brexit returned to the table.

On the technical side, GBPUSD on the 4-Hour timeframe has been following a downtrend since December 13. The price dipped below the key level of 1.31000 on December 18. The lowest level of the period under study stands at 1.30462. As of writing, the price is hovering around 1.30734 with negative Moving Average Convergence Divergence and Momentum below the 100 level.

The price is currently trading below the 50-period simple moving average with Relative Strength Index below 50 level which supports the recent bearish price move. Resistance level lies at 1.35160 while the support level lies at 1.30462. Bears are trying to push the price below the psychological mark of 1.30000, fresh Brexit concerns could strengthen the argument for further bearish movements.

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