GBP / USD falls back into negative territory but remains above 1.3300

• GBP / USD has fallen back sharply from the European session highs around 1.3380 but has managed to stay above the 1.3300 support.
• The pair appears to be waiting for more evidence that the Brexit deal is close before continuing the climb.

Amid a broad recovery in the US dollar at the start of the American session, GBP / USD has retreated from daily highs of 1.3380 to negative territory on the day, with the pair currently trading around the 1.3320 region.

GBP weakens as profit-taking ahead of Brexit

There is nothing new to report on the Brexit front, which could indeed be taken as a negative given the pumping that the GBP has received in recent days on the almost constant updates from the UK press on how the EU and UK they have come closer and closer to an agreement.

As things stand at the moment, the Prime Minister of the United Kingdom is supposed to, Boris Johnson, and EU Commission President Ursula von der Leyen, will speak sometime later in the week, and the prime minister will see the conversation as an opportunity to push for a deal. There have also been some conversations around (1) an intermediate agreement to allow more time for a full agreement to be reached (in other words, an extension) and (2)a review clause after 10-15 years for both parties to assess whether or not they are happy with how things are. The first suggestion goes strongly against the current rhetoric of the current UK Brexiteer government, while the second suggestion could be interesting insofar as it could encourage more flexibility in the negotiations if both parties know that there will be an opportunity to modify aspects of any agreement later.

But as markets await further updates, British pound is the underperforming G10 currency, in what appears to be no more than a small technical correction on what could be described as excessive optimism towards the British pound in recent days despite not yet being seen. has confirmed a Brexit deal. Still, the pair remains above 1.3300 for now, almost 400 pips above where the month started.

Meanwhile, the UK press is paying close attention to what what will happen when the national blockade ends on December 2 and at what levels various parts of the country will be placed (with a lot of emphasis on whether London will be placed at the most restrictive level 2). As for the GBP, this shouldn’t matter too much; the long-term economic impact of the full course of the Covid-19 pandemic and the future trade relationship between the EU and the UK take precedence over whether or not London pubs can open at Christmas.

Comments from Haskel of the Bank of England at the beginning of the session on recent news on vaccines (vaccines provide a light at the end of the tunnel, but it is too early to say whether growth prospects will improve significantly in 2021) have not GBP sentiment changed.

GBP / USD flirting with the upper limit of its long-term uptrend channel

The GBP/USD has again peeked above the upper bound of its long-term uptrend channel (which comes into play around 1.3340) earlier during Tuesday’s session, but has recently returned to the 1.3300 amid another rally in the USD during the European afternoon. For reference, the upper bound of this long-term uptrend channel links the highs of September 16, October 21, and November 10, 11, and 18.

The pair is currently trading around the significant zone of 1.3310-13 (November 11-18 highs). On the upside, key resistance levels are Tuesday’s highs at 1.3380 and Monday’s highs just below the psychological level of 1.3400.

On the downside, the level of 1.3300 holds for now and below that are Monday lows around 1.3266.

GBP / USD 4 hour chart