Daily Market Recap - GBPUSD

The GBPUSD is rising on Thursday against a backdrop of increased speculation that a Brexit deal will be reached shortly as well as the UK‘s approval of Pfizer’s covid-19 vaccine which is helping to lift investor sentiment on the British Pound. The GBPUSD is up 0.70 percent at the time of writing.

The main culprit behind the recent gains in the GBPUSD has undeniably been a widespread weakness in the US Dollar as evidenced by the Dollar Index (DXY) largely in freefall since the start of the month. The DXY has fallen over 3.5 percent in the past month on the basis of encouraging economic indicators and a return to rumors of a fiscal stimulus deal about to be concluded.

That said, with markets already pricing in heavily the announcement of a relief package by the US Congress, it is likely that a reversal in the greenback will occur shortly to the detriment of the already vulnerable Pound. Tomorrows US non-farm payroll figures will provide added volatility to the US dollar and may present an opportunity for a reversal in the buck.

From a technical perspective, the GBPUSD came close to testing the December 2019 High around the 1.35149 marks before pulling back towards the 1.345 handles. The main trend in the pair is up according to the daily chart despite yesterdays pullback. The pair will have to cross above the psychological 1.35 mark in order to convince traders further upside is on the table.

On the flip side, a move below the 1.33 would signal a strong rejection of any further advances and may set up a correction towards the 1.32 support channel. The likelihood of choppy trading remains present with the tug of war between the Brexit deal negotiations and the weakening dollar heavily influencing traders.

(Chart Source: Tradingview 03.12.2020)

Looking ahead, should rumors be true that a Brexit deal can be reached as soon as this weekend, the GBPUSD has a high chance of gapping higher at the start of next week. In contrast, failure to reach a deal soon would weigh heavily on the prospects of a GBPUSD trading above the 1.35 level, instead of condemning the pair to trade back towards the 1.32/1.31 levels.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.