Daily Market Recap - GBPUSD Weekly Outlook

The British Pound fell by over 1.5 percent in the previous week on the back of increased speculation of a no-deal Brexit. The UK and EU were set for make or break discussions over the weekend in which few expected any positive outcome to be had.

Coming into Saturday, it was apparent that both sides still had numerous contentious issues to resolve with little middle ground to be seen. Traders had already started to position themselves on Thursday/ Friday shorting the Pound heavily. The GBPUSD saw some reprieve around the 1.31741 support zone as the main selling target was the 1.30 psychological point.

Given the announcements last week by Prime Minister Johnson that a no-deal was very likely as well as news that the EU Brexit Chief Negotiator Michel Barnier briefed EU leaders to prepare for a no-deal scenario, it seemed almost certain that we would hear on Sunday the formal withdrawal from negotiations on both sides.

To the surprise of many, and fortunately for GBPUSD bulls, a decision was made to continue talks beyond the Sunday deadline. The statement came following a call between EU President von der Leyen and PM Johnson early on Sunday. Now whether or not a deal remains likely remains the key point of focus, and as of yet, we are still skeptical a deal can be achieved before the 31st of December.

That said, with regards to the GBPUSD in the coming week, we can expect some degree of rebound to occur sending the pair higher on Monday when markets reopen. In the short run, a target of 1.33 can be envisioned with the next resistance at 1.334 likely to cap any surges beyond.

The range for the GBPUSD in the early sessions of the week should fall between 1.334 and 1.31741. The 0.382 Fibonacci retracement level was strongly defended on Friday, and short-sellers shouldn‘t be too aggressive as markets will take some time to digest the new information from Sunday’s decision to continue talks.

Traders can look to conservatively long the GBPUSD early on Monday, with a target nearing the 1.33 mark. Price action in the run-up should determine whether a push for the 1.334 zones can be achieved.

(Chart Source: Tradingview 13.12.2020)

In the longer-term view, however, without any tangible concessions on the negotiation front by the EU and UK, we are still in doubt whether a deal can be reached. Along these lines, traders may look to re-enter short positions in the GBPUSD along the 1.33/1.334 channel and push for the 1.31 to 1.31 zone.

Support & Resistance levels:

R3 1.34809

R2 1.33438

R1 1.33000

S1 1.31747

S2 1.30801

S3 1.29830

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.