GBPUSD WEEKLY ANALYSIS – Bumpy Road Ahead; BOE Interest Rate & Brexit Extension Decision

GBPUSD WEEKLY ANALYSIS – Bumpy Road Ahead; BOE Interest Rate
& Brexit Extension Decision  

Following the previous report on GBP/USD, price action faced a
strong rejection from its 61.8 Fibonacci level near 1.2710, forming a shooting
star followed by a bearish engulfing candle that wiped out last week’s gains.
Price action expected to fluctuate between both 61.8 and 50.0 Fibonacci levels
where breakout from either side will provide a clearer long-term trend for the
pair.  

In terms of MACD, bullish momentum is exhausted with a possible
death cross forming ahead. As the price continues to play between its 200EMA
(blue) and 60EMA (green), breakout from either side will provide further
confirmation of its near-term movement.    

From the fundamental front, the Bank of England (BOE) will be
holding their monetary policy meeting on Thursday, where recent comments from
the central bank’s members are still considering negative interest rates as a
policy tool. This signals that the BOE will consider slashing their rates to
negative for the first time in history if the UK’s economy continues to slump
further amid the impact of the COVID-19.

Besides that, another downside risk faced by the UK is the Brexit
negotiations with the European Union where progress had been put to halt since
the pandemic. The UK have until the end of June to decide on whether or not
they want an extension for the Brexit transition period beyond the 31^st December deadline.

Two scenarios that could be expected on the
decision are:
1) The UK request for an extension beyond the 31^st December
deadline, giving both sides more time to strike a deal thus reducing the risk
of a no-deal Brexit.
2) The UK does not request for an extension, leaving them less than 6 months
time to reach a deal with the EU. This scenario will raise concerns towards a
higher chance of a no-deal Brexit.