GBPUSD surrenders below 1.27 ahead of the EU summit

GBPUSD surrenders below 1.27 this week as negotiations end today ahead of Thursday’s EU summit. The following looks at some key moments and the GBPUSD Elliott wave analysis.

October 15, 2019 | AtoZ Markets – The Cable has been the most volatile currency in October. This is not shocking. The Brexit deadline is close. EU and UK Brexit negotiators continue to debate on an exit deal. The clarification of  Northern Ireland’s custom relationship with the EU is a major concern. Last week, there was a high optimism after the UK and Irish PMs both agreed to push the deal forward. The pound reacted swiftly across the board. Afterwards, the UK Brexit secretary held a meeting with EU’s chief negotiator Barnier. GBPUSD hit 1.27 as the market expected a deal to be agreed in time before the EU summit.

Will negotiations be concluded ahead of Brexit deadline?

Meanwhile, this week, there has been a minor dip. GBPUSD surrenders below the 1.27 handle after Bernier’s comments that the UK’s Brexit proposals are not enough. In addition, he said that an agreement must be struck today otherwise the deal won’t be available in time for the EU leaders to debate on. It’s now a matter of whether the deal will be ready before the summit. Finland’s Prime Minister was pessimistic about this. He believed that time had already run out. If talks are inconclusive today, there will most probably be an extension of the deadline. This will lead to a minor decline for the Cable as uncertainties return. We should expect more headlines driving the market mood.

GBPUSD surrenders below 1.27: technical overview

Currently, GBPUSD is trading between 1.26-1.267 with 1.27 being the closest resistance level. The closest support level is 1.2516. The current market mood remains bullish and will remain so if it breaches above 1.27. In contrast, a fast dip below 1.2515 might lead to further decline to 1.24 or below.

GBPUSD Elliott wave analysis

From the perspective of the Elliott wave theory, the long-term trend is bearish. The current rally from 1.196 to 1.27 looks corrective. In the last update, we used the chart below.

GBPUSD surrenders below 1.27 GBPUSD H1 Chart (Trading View)

We expected a zigzag pattern rally to 1.27 where we expected some bearish reactions. However, a lot depends on the outcome of the Brexit deal. If the October 31 deadline is successful, the price will eventually breach above 1.27 and stay higher. Anything besides that, will lead to the continuation of the long term bearish trend as the new chart below shows.

GBPUSD surrenders below 1.27 GBPUSD H1 Chart (Trading View)

The roof of the zigzag channel is between 1.27-1.275. If the Cable holds below this zone, we should see a decline below 1.2515 down to 1.22. We will have to wait for the outcome of the deal at the end of today and how the price will react.

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