Cable or the GBPUSD pair is in a rising channel since September. Two interesting aspects of this channel are worth mentioning here. One is that it includes a psychological level – 1.30. Another is that it reflects the reaction to events related to the Brexit negotiations.
Speaking of Brexit, the E.U. delegation, currently in London, sends optimistic messages about a deal that can be reached. After the U.S. elections, that will likely be the scenarios that the markets consider as Biden is keen on the U.K. respecting the Good Friday accord. That is bullish for the GBPUSD as every time positive news regarding Brexit resurfaced, the pair traded well above 1.30 this year.
On the other hand, the U.K. is under renewed lockdown, and the second wave of the pandemic points to a grim picture in the weeks and months ahead. This may weigh on the British Pound more than the pandemic weighs on the USD for the simple reason that there are no lockdowns on the other side of the Atlantic yet. Hence, the economic output gap will increase.
Bank of England’s Governor Bailey Speaks Later Today
This week was marked by numerous public appearances from Governor Bailey – the most notable one at the ECB Forum on Central Banking. Even today, he is holding a speech during the North American trading session. He is scheduled to participate at the UBS online conference, and audience questions are expected. As such, the GBPUSD pair may experience some late volatility heading into the weekend.
GBPUSD Rejected at Dynamic Resistance
The recent surge from the lower edge of the channel came in the context of Brexit deal hopes. However, the price met dynamic resistance at a confluence area and was knocked down. In the meantime, on the lower timeframes, we can also spot a head and shoulders pattern – another reversal signal.
Bears may want to remain short with a stop at the recent highs and target the 1.30 as an intermediate target until the price breaks the channel to the downside.
GBPUSD Price Forecast