GBP/USD Analysis: Bulls wait a sustained move beyond ascending channel hurdle

• Not so optimistic Brexit headlines prompted some intraday selling around GBP/USD on Wednesday.
• COVID-19 vaccine optimism, softer US data undermined the safe-haven USD and helped limit losses.

The GBP/USD pair continued with its two-way price moves on Wednesday and was influenced by a combination of diverging factors. The British pound witnessed some intraday selling after the European Commission president, Ursula van der Leyden warned that a Brexit deal is far from certain and added that the disagreement over access to Britain's fishing waters continues to block progress. Von der Leyen also said that there had been genuine progress in Brexit talks but not enough to produce a significant breakthrough on key sticking points, including state-aid rules.

Separately, British Prime Minister Boris Johnson reiterated that the UK's position on fisheries hasn't changed and that they will not ask for additional time to negotiate the trade deal with the European Union. With very little time left before the Brexit transition periods end on December 31, the not so optimistic Brexit headlines took its toll on the sterling. Despite the negative factor, the pair managed to attract some dip-buying near the 1.3300 mark and the subsequent rebound suggests that investors remain optimistic about the possibility of a last-minute Brexit deal.

Apart from this, persistent selling around the US dollar assisted the pair to climb back closer to the 1.3400 mark. Optimism over the development of a COVID-19 vaccine and clarity on the US political front continued undermining the greenback's relative safe-haven status. The USD bearish pressure remained unabated following the release of a rather unimpressive US macro data. The revised version of the US GDP print matched original estimates and showed that the economy expanded by 33.1% annualized pace during the third quarter of 2020 as compared to market expectations for a 33.2% growth.

Meanwhile, the headline US Durable Goods Orders rose by 1.3% in October and orders excluding transportation also increased by 1.3%, both surpassing consensus estimates. The positive figures, to a larger extent, were negated by an unexpected jump in the Initial Weekly Jobless Claims. In fact, the number of Americans filing for unemployment insurance jumped to 778K for the week ended November 20. The latter indicated that imposition of new COVID-19 restrictions was undermining the labor market recovery and added to worries about the potential economic fallout from rising coronavirus cases.

Finally, the minutes of the November 4-5 FOMC meeting revealed that policymakers debated a range of options on bond purchases to support the economic recovery. The minutes, however, did little to provide any meaningful impetus. The pair finally settled with modest daily gains and edged higher for the fifth consecutive session on Thursday. In the absence of any major market-moving economic releases and liquidity is expected to remain thin on the back of Thanksgiving holiday in the US. Hence, investors will keep a close eye on fresh Brexit updates, which should continue to play a key role in influencing the sentiment surrounding the pound.

Short-term technical outlook

From a technical perspective, nothing seems to have changed much for the pair. Bulls might still need to wait for a sustained move beyond the 1.3400 mark – a two-month-old ascending trend-channel resistance – before placing fresh bets. Above the mentioned barrier, the pair is likely to accelerate the positive move towards September monthly swing highs, around the 1.3480 region, en-route the key 1.3500 psychological mark.

On the flip side, the 1.3300 mark now seems to have emerged as immediate strong support. Any subsequent fall might be seen as a buying opportunity and remain limited near the 1.3260 horizontal support. Failure to defend the mentioned support levels might prompt some technical selling and turn the pair vulnerable to slide further towards the 1.3200 area. The corrective slide could further get extended to the 1.3160 region before the pair eventually drops to test the next major support near the 1.3110-05 zone.