- GBP/USD has been resuming its gains amid upbeat news from the vaccine front and US politics.
- Concerns about restrictions around Christmas limit the pound's gains.
- Brexit negotiations may morph into an interim deal.
- Tuesday's four-hour chart is painting a bullish picture.
More upside than downside – but is it sufficient to break above 1.34? Monday's upside move failed to break that round level, but sterling has another chance. There are several moving parts that can be categorized into The Good, The Bad, and The Ugly.
The good – Three factors
Vaccine: AstraZeneca and the University of Oxford published promising results from their Phase 3 coronavirus vaccine trial. While the different dosage figures caused some confusion, markets are more optimistic now and await the final figures. The British-grown immunization scheme is the third out of three vaccines and emergency authorization is likely in the UK as early as next week.
Transition: President-elect Joe Biden will be able to begin his transition after outgoing PResident Donald Trump gave the green light to the move. The authorization removes political tensions and would allow for better control of the pandemic and the economy. The safe-haven dollar dropped in response to the news.
Janet Yellen, the highly regarded former Federal Reserve Chair, will likely be America's next Treasury Secretary. Her probable nomination has also been cheered by markets as she would support fiscal stimulus yet without endangering free trade.
The bad two adverse developments for GBP/USD
London lockdown? UK Prime Minister Boris Johnson announced the end of the nationwide lockdown in December but the localized tier system will likely be stricter than the previous one. Moreover, it is still unclear if London, one of the world's financial capitals, will be under severe restrictions.
The UK's case curve is falling, yet mortalities remain elevated.
Dollar reacts to data: The second adverse factor for cable stems from encouraging US figures – Markit's Purchasing Managers' |Indexes beat estimates and pointed to strong growth in November. The US dollar shot higher in a surprising reaction to usually second-tier figures.
The ugly – Brexit
Brexit negotiations remain around "95% done" – while higher than AstraZeneca's best efficacy figures, the lack of a breakthrough on the most contentious issues is becoming worrisome as the clock ticks down to year-end, when the transition period expires.
Will the EU and the UK kick the can down the road? The idea of an interim agreement floated on Monday, adding a layer of complication. Headlines range from hints of an imminent accord to a collapse in talks, adding to the confusion.
Overall, most factors point to the upside, yet risks loom large.
More GBP/USD Three reasons to expect a sustained Santa rally for sterling
GBP/USD Technical Analysis
Pound/dollar has been benefiting from upside momentum on the four-hour chart and is trading above the 50, 100 and 200 Simple Moving Averages. The Relative Strength Index is still below 70, thus outside overbought conditions.
Overall, the bulls are in full control. Resistance is at Monday's peak of 1.3397. The next lines to watch date back to the summer when 1.3420 and 1.3510 played a role in holding GBP/USD down.
Support is at 1.3310, the former double-top, and then by 1.3265, Monday's trough. Further down, 1.3245 is the next level to watch.
More When the market shivers, the Fed delivers? Where next for markets
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.
Recommended Content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.