Daily Market Recap - GBPUSD

The British Pound has struggled to regain positive traction against the US Dollar since the sharp selloff seen on Monday. The pair is under pressure from the ongoing stalemate in the Brexit trade deal negotiations after no concrete progress has been made after several days of tense discussions between representatives from both sides.

Mixed signals from the UK hasnt helped the prospects of the GBPUSD. British Cabinet Minister Michael Gove announced an agreement in principle to all issues in the UK-EU withdrawal agreement just as Prime Minister Johnson hinted that Britain could abandon trade talks altogether.

Negotiations have now escalated to the highest level with both PM Johnson and EU President Von der Leyen in direct communication in order to attempt to reach a deal in the coming weeks. However according to the EUs chief Brexit negotiator Michel Barnier, the chances of a deal are now very slim.

Indeed, the EU and UK still have many important issues to resolve notably on the fisheries, state aid, and the so-called level playing field arrangement. The only positive point from discussions has been news that the EU and UK have reached an understanding on the Ireland/ Northern Ireland border dispute.

From a technical perspective, the GPBUSD risks accelerating to the downside should there be no encouraging signs on the Brexit front. We can expect further selling pressure to drive the cable down below the immediate 1.33 support level as momentum starts to favor the bears.

A break below that point should provide an opportunity for sellers to take control and make a push for the 1.32/1.31 channel in the coming sessions. The longer-term 1.30 mark being the ultimate target for bears at this point.

On the upside, the 1.34842 resistance level should cap any gains barring positive developments in the trade negotiations. The likely trading range for the week should fall between 1.34 and 1.32.

(Chart Source: Tradingview 08.12.2020)

Looking ahead, traders should be prepared for bouts of strong volatility in the coming days in response to headline-driven price action. Any weakness in the Brexit trade negotiations may spark a strong reaction in the already vulnerable GBPUSD. The only supporting factor so far being the commencement of covid-19 vaccination in the UK.

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.