Daily Market Recap - GBPUSD Weekly Outlook

The British Pound fell victim to some profit-taking at the end of last week sending the GBPUSD to close lower towards the 2019 high of around 1.352. The cable looks set to correct even further in the coming session as news of a novel coronavirus strain in the UK and Brexit uncertainties loom over the outlook for the Pound Dollar exchange rate.

The GBPUSD was the worst performer amongst the major forex pairs on Friday despite putting in a strong performance over the week on the back of early encouraging signs that a Brexit trade deal between the EU and the UK could be reached soon.

Sterling received a jolt over the weekend as UK officials announced the discovery of a new coronavirus variant in the country which it is still currently trying to fully understand. The alarming news has already prompted the UK government to issue new lockdown restrictions while some EU nations have issued a travel ban from passengers from the UK.

Pound optimists have suggested that the covid-19 vaccines developed in the past weeks are still effective against the new strain though it is likely that further research will be needed to confirm this claim. Thus far, attempts to contain the virus have failed in the UK, and should the new variant prove harder to address, we can expect further downside risk on the GBPUSD.

From a technical perspective, the GBPUSD is geared to gap lower on Monday at market open and may trade closer to the 1.335 level before the day ends. Selling pressure will likely ramp up should the pair break below the 20-day MA in red. The target for bears will be to reach the 1.33 level in the coming sessions.

(Chart Source: Tradingview 20.12.2020)

Traders may look to short the GBPUSD around 1.35 for a push towards the 1.33 zone while looking out for any change in price action within the range. Momentum is shifting towards the neutral area on the daily chart, with the shorter-term trend pushing into negative territory. The 1.32 level will be longer-term hard support and the shorter term 1.34 should prove the first hurdle of interest.

Support & Resistance Levels:

R3 1.37000

R2 1.36248

R1 1.34809

S1 1.33438

S2 1.33000

S3 1.31747

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.