September 12, 2021

GBPUSD Struggles On New Virus Strain, Brexit Woes

After several weeks of gains, the pound comes under pressure because of the new coronavirus strain and a looming no-deal Brexit.

The news of a new fast-spreading coronavirus variant has caused Britain to become isolated from most of the world. A total of 40 countries have already banned flights to the country, including a suspension of transport links by France that effectively disrupts the flow of food and other necessary supplies to Britain before Christmas.

And with the Brexit transition period on Dec. 31, U.K.'s current situation could be a preview of what's about to come if a no-deal scenario takes place.

Before the three-day slump that shed off 1.69% of its price, the GBPUSD pair was on a tear and even breached a multi-year resistance line at 1.3365. The cable even attempted to go higher as the market turned optimistic on the strength of vaccine hopes on herd immunity and Britain being the first Western country to approve the Pfizer-BioNTech vaccine's emergency use.

But the string of negative news caused the pound to struggle against the greenback for the time being. The pair did find support early morning Wednesday at around 1.3360, rising to 0.50% at its current price at 1.3430. Nevertheless, many still expect the pound to remain volatile as Brexit talks near a close.

On the technical side, GBP is still resoundingly bullish, at least by most technical indicators. There is still a clear gap between the price and the 50-day moving average.

And the FX market seemed to have calmed down and digested every bit of information, which opens up potential gains for riskier assets.

But if it were to fall further, as the MACD supports a short-term fall, 1.3350 would be targeted first. If that level is broken, it could expose the 1.3300 support level all the way to 1.3285.

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