Daily Market Recap - GBPUSD

The British Pound has settled higher against the US Dollar on Wednesday as the recent panic over the new coronavirus strain in the UK receded, with the spotlight back on Brexit. The GBPUSD gained some further bids on the back of increased speculation that a UK-EU trade deal may be reached shortly. The pair rose 1.02 percent for the day.

According to reports from EU sources, member states are preparing a provisional application of a trade deal starting January 1st. With the easing of the French border to allow UK lorries to cross at Dover, some analysts have pointed out this may be in anticipation of reaching a deal, potentially as early as tomorrow.

Meanwhile, the contentious issue of fishing rights within the Brexit deal has caused bottlenecks in the negotiations in the past but optimism remains that a creative solution can be found soon. Given that the fishing industry accounts for only around 0.2 percent of both economies, officials on either side will likely end up reaching a compromise in order to secure other parts of the deal.

The overall elation in reaching a Brexit trade deal has lifted the GBPUSD closer towards the levels it traded at before the previous deadline on negotiations last week. That said we are seeing numerous mixed reports from the UK with many observers still noting that talks are still ongoing and urge caution in the market.

From a technical perspective, the GBPUSD looks set to push higher overnight and remains highly volatile to headlines in developments in the Brexit trade agreement. Resistance should be felt around last weeks high at 1.36208 in the event no deal is announced in the coming session.

(Chart Source: Tradingview 23.12.2020)

On the flip side, the 1.34 round, psychologically significant support level should present the immediate support zone. Below that, the 0.382 Fibonacci retracement level around 1.32612 should cap off any further dips in the near term. The current range in the GBPUSD appears to fall between the 1.36 and 1.33 levels, with momentum about to cross over in bullish territory.

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.