GBP/USD holds above 50-DMA, Hard Brexit ahead?

GBP/USD trades steady above the 50-DMA level of 1.2426 as investors await more info about the two-year long Brexit negotiation process.

Low odds of Hard Brexit

Speculation is gathering pace that the UK will be penalized by the EU via a Hard Brexit so as to discourage anti-EU voices in other parts of the Eurozone. But it is easier said than done for the EU.

UK amounts to 17% of the EU GDP and is a major consumer of the EU goods. The UK is one of the biggest markets for the German autos. Hence, a Hard Brexit looks unlikely. Legendary investor Jim Mellon believes the Brexit negotiations will be pragmatic.

Another point to consider here is whether the negotiations would be done in the two-year time period. Given the size of the UK economy, the talks could easily last beyond two years.

Meanwhile, traders also hope the negotiations would happen behind the closed doors, so that the pair begins responding to economic data releases.

GBP/USD Technical Levels

The spot was last seen trading around 1.2445. A break above 1.2476 (previous day’s high) would expose 1.25 (zero figure), above which the pair could test supply around 1.2569 (Feb 24 high). On the other hand, a breakdown of support at 1.2426 (50-DMA) could yield a re-test of 1.24 (zero figure) and 1.2376 (previous day’s low).