GBP/USD Analysis: Bulls eyeing recent highs despite stalled Brexit talks


  • GBP/USD regained positive traction on Friday and moved back closer to weekly tops.
  • Bulls seemed unaffected and largely shrugged off not so positive Brexit developments.
  • A sustained move beyond 1.3310 level is needed to support prospects for further gains.

The GBP/USD pair gained some positive traction on the last day of the week and built on the previous day's goodish rebound from sub-1.3200 level. The uptick was supported by a subdued US dollar demand – amid conflicting signals from the US regarding COVID-19 stimulus – and got an additional boost following the release of upbeat UK retail sales figures.

Reports indicated that US Senate Republican and Democrat leaders had agreed to resume negotiations on another coronavirus stimulus package. The positive development, to a larger extent, was offset by the US Treasury Secretary Steven Mnuchin's decision to end some of the pandemic relief for struggling businesses. The announcement took its toll on the global risk sentiment and extended some support to the greenback's safe-haven status. However, concerns about the economic fallout from the imposition of new COVID-19 restrictions in several US states and dovish Fed expectations held the USD bulls from placing aggressive bets.

On the other hand, the British pound was underpinned by Friday's stronger-than-expected UK macro data. In fact, the headline retail sales recorded a growth of 1.2% MoM in October as against consensus estimates pointing to a flat reading. Meanwhile, the core retail sales (stripping the auto motor fuel sales) also came in better-than-expected and stood at 1.3% MoM during the reported month. That said, the pair remained below its recent highs amid persistent Brexit-related uncertainties. It is worth recalling that in-person talks were suspended on Thursday after a member of the EU team was tested positive for COVID-19. This might have raised the possibility for an extension to the transition period and extended some support to the sterling.

Meanwhile, the EU negotiating team reportedly briefed envoys of the bloc's 27 member states that Brexit talks remain unresolved on three main issues – level playing field, fisheries and state-aid rules. The comments did little to prompt any meaningful selling around the pair, which was last seen hovering near the top end of its daily trading range, just below the 1.3300 round-figure mark. In the absence of any major market-moving economic releases from the US, the incoming Brexit-related headlines will continue to play a key role in driving the near-term sentiment surrounding the major.

Short-term technical outlook

From a technical perspective, the pair on Thursday showed some resilience below the 1.3200 mark and bounced off 200-hour EMA. The subsequent positive move favours bullish traders and supports prospects for additional gains. However, it will be prudent to wait for some follow-through buying beyond the 1.3300-1.3310 region before positioning for any further near-term appreciating move. A convincing breakthrough will be seen as a fresh trigger for bullish traders and set the stage for a move towards September daily closing highs, around the 1.3385 region, en-route the 1.3400 mark.

On the flip side, immediate support is pegged near the 1.3250-45 region ahead of 1.3220 level (200-hour EMA) and the overnight swing lows, around the 1.3195 zone. Failure to defend the mentioned support levels might prompt some technical selling and turn the pair vulnerable to accelerate the slide further to weekly lows, around the 1.3160 region. The downward trajectory could further get extended towards the next major support near the 1.3110-05 zone.

fxsoriginal

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD recovers toward 1.1350 on modest dollar weakness

EUR/USD edged higher in the early American session and managed to erase its daily losses. Ahead of Fed Chair Powell's testimony, the pair is closing in on 1.1350. Earlier in the session, the data from the US showed that employment in the private sector rose by 534,000 in April, surpassing the market expectation of 525,000. 

EUR/USD News

GBP/USD extends sideways grind around 1.3300 ahead of Powell's testimony

GBP/USD continues to move sideways around the 1.3300 handle on Wednesday after the data from the US failed to trigger a significant market reaction. The ADP Employment Change arrived at +534K in November, compared to the market expectation of 525,000. FOMC Chairman Powell will testify at 1500 GMT.

GBP/USD News

Gold clings to recovery gains near $1,790

Gold gained traction after dropping below $1,780 in the early European session and climbed toward $1,790. Ahead of FOMC Chairman, the 10-year US Treasury bond yield is up more than 1% on the day, limiting gold's upside for the time being.

Gold News

Altcoins recover as Bitcoin chops

BTC price is consolidating while it tries to move higher, but Ethereum price seems to be enjoying a full-fledged rally as it comes closer to setting up new highs. Ripple price, on the other hand, is struggling to find bullish momentum.

Read more

Cyber Monday 2021 Discounts!

Glued to your trading screen on Cyber Monday? Upgrade your skills by signing up for FXStreet’s Premium service, offered at a discount of up to 50%. Fellow traders have already taken advantage of Black Friday profits. What about you? 

Subscribe now!

Majors

Cryptocurrencies

Signatures