- GBP / USD is again supported by Brexit hopes, with reports suggesting that the French have accepted less access to UK fishing waters.
- GBP / USD gains have stalled at 1.3300, but the short-term technical outlook remains bullish.
The GBP/USD It is currently trading just below the session highs below 1.3300, and the pair is holding gains of just over 50 pips, growing 0.4%.
Expectations for a Brexit deal rise
The recent strength of the GBP, which has seen the pair move to this week’s lows at 1.3160 ​​towards current levels around 1.3300, driven in large part by growing hopes that the EU and UK can reach a deal about your future business relationship in the coming days / weeks.
Reports on Tuesday that a deal could be just days away saw a pullback from 10 Downing Street, but nonetheless propelled the British pound higher at the time. Furthermore, reports on Wednesday that France may have ‘accepted’ that they will receive less access to UK fishing waters in the future than they do now have also helped drive improvement, as this acceptance could open the door to a compromise on bargaining for fishing that is more acceptable to the UK.
From a market perspective, the update from EU chief Brexit negotiator Michelle Barnier to EU ambassadors on Friday will be crucial, and GBP bulls are hoping Barnier will confirm reports that a deal is close.
Elsewhere, GBP traders are targeting Bank of England speakers as well. On Wednesday morning, the bank’s chief economist, Andy Haldane, noted that while the economy beat expectations in the third quarter of 2020, the outlook for the fourth quarter of 2020 is highly uncertain. However, he continued, the economic outlook for next year is perhaps materially brighter than expected a few weeks ago, apparently in reference to recent positive news on the vaccine front.
Looking ahead, Bank of England Governor Andrew Bailey will speak at 4:30 PM GMT as part of a conversation with Congressman Langevin at the Carnegie Institute for World Peace, so his comments are unlikely to be related. with policies. Yesterday, the governor of the Bank of England said he praised the “encouraging” news about the vaccine and said it would play an important role in reducing uncertainty. In addition, he said he now sees some light at the end of the tunnel, but that more financing would be needed to ensure viable businesses survive.
UK inflation data for October was also released on Wednesday, beating expectations in both core metrics and core readings, but remains well below the Bank of England’s 2% inflation target and therefore therefore, it did not affect the GBP much at the time. More notable UK data will be released on Friday in the form of October retail sales figures, although this data is likely to be considered out of date given the UK reverted to lockdown just in early November. Furthermore, GBP seems more concerned about the Brexit issue than anything else at the moment.
GBP / USD continues to respect uptrend lines as it moves towards 1.3300
GBP / USD gains have not only been capped by 1.3300 on Wednesday, but also by the upper bounds of an uptrend channel linking the lows of November 6 and 9 with the highs of the early European session on Wednesday. .
Despite encountering resistance in this region on Wednesday, the technical outlook remains bullish for GBP / USD, and the pair has been continuously supported by the lower bounds of a recent uptrend channel linking the lows of 13, 16 and November 17.
Therefore, a more aggressive test of 1.3300 is likely to occur in the near future. However, significant resistance resides just above the 1.3300 level; There is a November high at 1.3313 and a September 4 high at 1.3320. Additionally, there is also the upper bound of a longer-term uptrend channel linking the highs of September 16, October 21, and November 10/11, which is likely to come into play around 1.3320.
A failed break in this resistance zone could indicate a broader decline towards the lower bounds of the GBP / USD long-term uptrend channel (see four-hour chart). However, for a move back towards the 1.30 low to materialize, the pair would need to break below the short-term trend line support levels, including the aforementioned trend line support linking the lows 13, 16 and 17, as well as a rise. trend line joining the lows of November 2, 4, 5 and 13.
4 hour chart
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