On Tuesday, the GBPUSD pair staged a solid rebound from the 1.2915 mark towards the key 1.30 psychological level. However, the bulls failed near this important region and the major lost its steam, dropping to 1.2966 during the European trading,

Today, risk aversion which penetrated to markets yesterday, deepened as coronavirus keeps on spreading globally like wildfire. South Korea reported 60 news cases on Tuesday, raising the total number of sufferers to 893 while the death toll reached 10. Italian authorities confirmed the seventh death from the new disease and imposed a lockdown on at least ten cities in the northern part of the country. Further, Austria and Croatia joined the list of affected countries reporting their first cases today. And though the WHO didn’t want to make a big thing of it, they had to acknowledge that the new virus has ‘absolutely’ all chances to become a new pandemic. The situation that is becoming more and more appalling weighed on the markets, in particular on risk assets and stocks.

The US Treasury yields refreshed multi-year troughs amid risk-off trends and weakened the US Dollar across the board. Another reason for the greenback’s decline was the renewed speculations that due to the coronavirus spread, the Fed may cut rates in a more aggressive manner than it was expected earlier this year. The drop in the USD demand helped the pair to rise to the key region.

However, the EU’s mandate for the upcoming Brexit trade talks published today put a lid on the major’s upswing. In its document, the European Union put a key emphasis on the need for a ‘level playing field’ in most spheres, including, among others, the labor market and the environment. That means that the UK will have to abide more strictly by the current EU rules – the thing that Boris Johnson tries to avoid at all cost stressing the high importance of the UK future sovereignty. Thus, the uncertainty in the trade talks persists as well as the fears of a possible hard Brexit after the expiration of the transition period. All this keeps the GBP bulls on the defensive.

From the technical point of view, the GBPUSD pair challenges the SMA200 (today at $1.2970) on the 1-hour chart but sits below its SMA200 at $1.3010 on the 4-hour chart. The major changes gains with losses, however bears continue to keep the situation under their control. Thus, it would be prudent to wait for a strong move in one or another direction before placing bets on the pair’s rally or a decline. The support is pegged at 1.2945, 1.2885 and 1.2850 while the resistance lies at 1.2995, 1.3020 and 1.3055-70.


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