- GBP / USD has seen some new selling after the UK announced a second national lockdown.
- Concerns about the economic consequences of the COVID-19 restrictions have benefited the safe haven USD.
- Technical selling below the 1.2880 level appears to have further compounded the downward pressure.
The pair GBP/USD has extended its recent downward movement and has fallen to almost a month lows, around the 1.2855 region, at the start of the European session on Monday. At the time of writing, the pair manages to recover a few pips towards the 1.2890 region, still negative on the day.
The pair has started with a modest bearish gap on the first day of a new trading week in reaction to the imposition of a second nationwide lockdown in the UK. Given the alarming rate of growth of new COVID-19 cases in the country, British Prime Minister Boris Johnson announced on Saturday a lockdown in England until December 2. A senior cabinet member said Sunday that the lockdown could be extended, which in turn is taking its toll on the British pound.
Meanwhile, growing concerns that renewed blockade measures in western countries could be detrimental to global economic recovery it has continued to benefit the safe haven US dollar. The Events surrounding the coronavirus saga have largely overshadowed the latest optimism about a soft Brexit. It is worth reporting that the Brexit negotiations will continue with talks in Brussels on Monday and into the middle of the week.
The continuation of the talks is now seen as a sign that both sides are still pushing to avoid a damaging breakup. in trade and seal a new deal before the end of the UK transition period later this year. However, the GBP bulls do not seem very impressed and prefer to stay on the sidelines and wait for further updates on Brexit.
Aside from the above factors, the chances that some short-term stop orders have been triggered below last week’s lows, around the 1.2880 region, appear to have further compounded the downward pressure. Some subsequent selling below the 1.2850 region will be seen as a new trigger for the bears and will pave the way for a further decline in GBP / USD.
Credits: Forex Street

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