GBP/USD Takes a Breather, But Trade Deal Could Make Take the Pair Above 1.3700
The GBP/USD finds itself under pressure this Friday, as markets await direction from post-Brexit trade talks. There are feelers that a deal could be struck this weekend, but the nagging issue remains the fishing rights.
Reports say that the EU Chief Negotiator Michel Barnier may be pushing for concessions on the fishing rights, requesting for concessions on quotas from some EU states. The bets on a deal being made are at least higher than they have been in a long while.
However, the Pound saw fresh headwinds when Reuters quoted Bank of England (BoE) policymaker Gertjan Vlieghe as saying that any rate cut that helps the UK economy has to be greater than 10 basis points to work. He is also saying that a mix of rate cuts and quantitative easing may be the best option.
The Pound reacted negatively to these comments, giving an opportunity for profit-taking ahead of the weekend.
Technical Levels to Watch
The rejection at 1.36117 precipitated a selloff this Friday on the GBP/USD. This drop has met support at 1.35134, but that support is being challenged vigorously. A breakdown of this area will target 1.34997 next, followed by the 1 September and 23 November highs at 1.33951. If the price continues to drop towards the channel’s lower edge, we could see 1.33193 and 1.32663 come into play.
On the flip side, the drop mentioned above could be a dip-buying opportunity for bulls who expect a trade deal this weekend. The upside target of choice above the channel remains the 1.37016 level, which relies on bulls taking out 1.36117 to be achieved.