GBP/USD Analysis: Upside remains capped near ascending channel resistance

• A combination of factors assisted GBP/USD to regain positive traction on Tuesday.
• Hopes for a last-minute Brexit trade deal continued lending support to the pound.
• The risk-on mood weighed heavily on the safe-haven USD and remained supportive.

The GBP/USD pair had some good two-way price swings on Tuesday and finally settled in the green for the third consecutive session, albeit remained below twelve-week tops set in the previous day. In the absence of fresh Brexit updates, the lack of progress on three sticking points – the so-called level playing field, fisheries and state-aid rules – prompted some intraday selling around the major. However, investors remained optimistic about the possibility of a last-minute Brexit trade deal, which, in turn, continued extending some support to the British pound. Apart from this, the emergence of some fresh selling around the US dollar further contributed to the pair's overnight uptick.

The greenback remained depressed on the back of the prevalent risk-on environment amid the progress toward remedies for the highly contagious coronavirus disease. Meanwhile, the formal start of US president-elect Joe Biden's transition to the White House cleared the uncertainty on the US political front. This, along with reports that the former Fed Chair Janet Yellen could become the next US Treasury Secretary, provided an additional boost to the already upbeat market mood. The USD bulls failed to gain any respite from Tuesday's disappointing release of the Conference Board's Consumer Confidence Index, which dropped notably to 96.1 in November from 101.4 in the previous month.

Despite the supporting factors, the pair lacked any strong bullish conviction and the upside remained capped below the 1.3400 round-figure mark. The pair was seen hovering in a narrow trading band around mid-1.3300s through the Asian session on Wednesday. There isn't any major market-moving economic data due for release from the UK and British finance minister Rishi Sunak is due to deliver a one-year Spending Review to the parliament at around 1230 GMT. Apart from this, the incoming Brexit-related headlines will influence the sterling and produce some trading opportunities. Later during the US session, a slew of top-tier US macro data, followed by the FOMC meeting minutes will determine the next leg of a directional move for the greenback and provide some meaningful impetus.

Short-term technical outlook

From a technical perspective, the pair has been struggling to make it through a resistance marked by the top end of a two-month-old ascending trend-channel. That said, the emergence of some dip-buying on Tuesday still favours bullish traders. However, it will be prudent to wait for some follow-through buying above the mentioned barrier, currently near the 1.3400 mark, before positioning for any further appreciating move. A sustained breakthrough will be seen as a fresh trigger for bullish traders and push the pair further 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 round-figure mark might continue to act as immediate strong support. Any subsequent fall might still 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 back towards the 1.3200 round-figure mark. 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.