GBP/USD: Extreme sterling sensitivity to Brexit headlines may offer a buying opportunity

GBP/USD has tumbled toward 1.32 in response to a growing divide in Brexit talks. EU and UK negotiations continue talking, keeping some hope alive, which may provide a buying opportunity after the cable’s 200-pip collapse, Yohay Elam, an Analyst at FXStreet, briefs.

Key quotes

“UK Prime Minister Boris Johnson is reportedly ready to abandon talks ‘within hours’ if the EU does not retract its latest demands. This headline from The Sun turned a modest decline in the cable into a spiraling free-fall. Is it just posturing – meant for the local audience – before a final handshake? If that is the case, there is a major buying opportunity.”

“Both sides prefer a deal over no deal, especially as the pandemic continues weighing on the economies on both sides of the English Channel. Is it enough for compromises at the last moment? The answer depends on the definition of ‘the last moment.’ Perhaps an accord is unachievable on Monday but could be reached on Thursday and on Friday when EU leaders convene virtually.” 

“At the time of writing, talks continue in Brussels and have yet to break up, keeping hope alive. An official conclusion of the current round of talks could send GBP/USD down, while any reports of progress could boost it.” 

“Pound/dollar has tumbled down, sending momentum on the 4-hour chart to negative territory. On the other hand, the fall was so sharp that it also pushed the Relative Strength Index to 30 – on the verge of oversold conditions.”

“The daily low of 1.3225 provides some support and it is followed by 1.3195, which cushioned the currency pair in mid-November. Resistance is at 1.3265, which was a swing low in late November, followed by 1.3320, a cushion from early December.”