GBPUSD, H1
The Pound has taken a turn lower, racking up a 0.5% loss to the Dollar and about a 1% decline versus the Yen, while also softening a little against the Euro. The backdrop of sliding stock markets in Europe has weighed on the Pound, which has established a pandemic-era proclivity to underperform its main currency peers during risk-off periods. Attention also remains on the UK-EU trade negotiation front. The decision by EU fisheries ministers not to change course on their position — to maintain the “status quo”, as the EU’s chief negotiator Barnier put it, has “skewed things late in the process,” according to a Downing Street source cited by the Guardian. London is frustrated by Barnier’s inability, thus far, to convince various member states to look for a compromise. The UK is insisting that it will be an independent coastal state, and that there needs to be a new relationship with the EU with regard to fishing, pointing to Norway as a working example. The EU, on the other hand, wants to emulate the common fisheries policy (CFP), under which fishing quotas are agreed at an annual negotiation. This is a major issue for the UK which ran large in the pro-Brexit campaign. The UK government, for instance, points out that the scheme has led to France having 84% of the cod quota in the English Channel. The EU is now expecting the talks to drag on until October, regardless of whether the UK asks for an extension of its post-Brexit transitory access to the single market (which it has to decide on by July 1st). Unless there is a breakthrough in trade negotiations, the pound’s upside potential is likely to remain limited.
Technically, the daily chart remains in bid mode, having closed above the 200-day moving average (1.2676) yesterday (June 8) for the first time since March 11 and completed 8 consecutive days of gains. H4 has moved to test the 20-period moving average on the close of the last candle, whilst the H1 time frame triggered lower on the break of the 20-hour moving average at 1.2700 and moved below yesterday’s low at 1.2627 to test 1.2616.
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Stuart Cowell
Head Market Analyst
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