GBP/USD analysis: Brexit headlines denting Pound's demand

Valeria Bednarik FXStreet

GBP/USD Current price: 1.2646

UK Cabinet speeding up preparations for a no-deal Brexit.
Inflation in the United Kingdom seen easing further in November.

The GBP/USD pair advanced up to 1.2705 on the back of dollar's broad weakness, but Brexit jitters continued to dent the upward potential of the Sterling. Just 3 months away from the breakout date, Brexit remains unsolved. The latest on the matter is that the UK Cabinet is speeding up its preparations for a no-deal Brexit, as the EU has clearly said that it can't offer a legal guarantee to limit the Irish backstop, something that would incentivize the UK Parliament to vote May's deal. It's not only the fate of the deal but also that of PM May currently under fire, limiting interest in the Pound even when the dollar is being dumped. And here comes UK inflation. The kingdom will release November CPI and PPI figures, with monthly inflation seen up 0.2% and yearly one rising by 2.3%. Core YoY CPI is foreseen at 1.8% vs. October 1.9%.

Currently hovering around 1.2640, the short-term picture shows that the positive momentum is limited, as the pair is barely holding above a flat 20 SMA and still well below a bearish 200 EMA, while technical indicators are advancing within positive ground with uneven strength. Bigger time frames maintain the risk skewed to the downside, as in the daily chart, selling interest aligned around a bearish 20 DMA rejected the intraday advance. As mentioned on a previous update, seems unlikely that the pair could sustain gains beyond the 1.2700 figure, although the Fed could clearly change the picture. Bears will get back the grip on a break below 1.2590.

Support levels: 1.2590 1.2545 1.2500

Resistance levels: 1.2685 1.2720 1.2750

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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