GBP/USD remains capped below 1.3500 mark, up little ahead of NFP

Following some intraday volatility during the first half of the European trading action, the GBP/USD pair now seems to have stabilized around the 1.3475 region.

In the latest Brexit-related developments, the French Junior European Affairs secretary Clément Beaune said there is a risk there will not be a Brexit deal and that they would veto any deal that is deemed unsatisfactory. This, in turn, exerted some downward pressure and dragged the pair to an intraday low level of 1.3410.

The downtick, however, turned out to be short-lived and was quickly bought into after an EU official reportedly said that a trade deal with the UK is imminent and is expected by the weekend. The GBP/USD pair rallied around 80-85 pips in reaction to the headlines and was further supported by a softer tone surrounding the US dollar.

The USD Index languished near a two-and-a-half-year low amid the optimism over the rollout of a COVID-19 vaccine, increasing bets for a new US coronavirus relief package and monetary easing by the Fed. The downside remained limited, at least for now, as investors moved to the sidelines ahead of the US monthly jobs report.

Meanwhile, British Prime Minister Boris Johnson's spokesman said on Friday that it will not be possible to reach a deal with the EU if it doesn't respect the UK's fundamental principle of taking back control. This seemed to be the only factor that kept a lid on any further gains and held the GBP/USD pair below the key 1.3500 psychological mark.

With less than four weeks left before the Brexit transition period ends on December 31, traders are likely to wait for fresh Brexit updates before placing directional bets. In the meantime, the US employment details – popularly known as NFP – will be looked upon for some short-term trading opportunities on the last day of the week.

Technical levels to watch