GBP/USD challenging the 1.3200 level

Despite most markets being closed amid the New Year’s Eve holiday, major currencies are showing signs of life, with the greenback still being the weakest. The GBP/USD pair is a handful of pips below the 1.3200 threshold, trading at its highest in two weeks.

The enthusiasm triggered by PM Johnson’s victory in the general election sent the pair up to 1.3513, from where it plunged to 1.2904 in a matter of days, on the back of Johnson’s decision to cap the negotiation period with the EU to December 2020.

Dollar's weakness leads the way

The following recovery is a consequence of the dollar’s dumping rather than the resurgent demand for the Pound. The greenback’s decline, however, has no fundamental basis. The US is about seal phase one of a trade deal with China, and growth data suggest that the country is moving away from a possible recession.

Wall Street is losing some ground these days but is about to close the year with substantial gains, extending the rally that began in March 2009. Thinned volumes at this time of the year, may also have to do with the ongoing dollar’s decline. The question is if these moves will continue once the market returns to normal, usually in the second week of January.

The pair is currently nearing the 50% retracement of the mentioned slide at 1.3208, while some relevant intraday highs are in the 1.3230 price zone, making of this last a relevant resistance area. The next resistance comes at 1.3280, the 61.8% retracement of the same decline. December 30 high at 1.3150 is the immediate support, en route to the 1.3100 figure.