GBPUSD WEEKLY ANALYSIS – Price Action Failed To Break Above; Heading Back Towards Support Zone

GBPUSD WEEKLY ANALYSIS – Price Action Failed To Break Above;
Heading Back Towards Support Zone  

Following the previous report on GBP/USD, price action extended
lower towards the support level from September 2019 near 1.2060, before
rebounding from the level to retest its 38.2 Fibonacci level near 1.2240.
However, the pair was then rejected by its 20EMA near to the 1.2300
psychological level and was traded lower back below the 38.2 Fibo level. Price
action is suggested to extend its loss back towards the support of 1.2060,
whereby a further breakout would suggest the pair to extend even lower towards
the 23.6 Fibo level near 1.1940. 

Following the price action’s rebound from its support level, the
bearish momentum from the MACD slowly diminishes, however, failed to form a
golden cross, now continues to signal a bearish momentum. In terms of moving
averages, both short-term and long-term EMA are also supporting further
downside potential for the pair. 

From the fundamental front, the Bank of England (BOE) had shifted
their stance towards their monetary policy during the recent speech on
Wednesday, led by Governor Bailey. Previously, the BOE mentioned that negative
interest rate is not something that they are looking into. However, Bailey
later stated that although negative rate is a very complex policy tool that
differs depending on the structure of a country’s financial system, they will
continue to monitor how UK’s economy responds to recent cuts first before
implementing a negative rate.    

The shift in tone by the BOE had led the market’s expectation
negative rate adoptions higher, causing investors to sell-off the currency.
Furthermore, Brexit negotiations failed to report any progress, with the
deadline to request for a further extension beyond 31^st December is
now due in 6-weeks time. Although UK Prime Minister Boris Johnson had
reiterated that no form of extension would be considered, it increases the
likelihood of a no-deal Brexit.

All in all, the outlook towards the UK’s economy and its currency is
not looking good, dragging down investors’ confidence overall as well.