GBP/USD: Brexit Fish Fight May Prove Buying Opportunity, BOE Unlikely To Rein The Bulls

The BOE announces its decision less than 24 hours after the US Federal Reserve concluded the year without any policy changes but with a new commitment to continue Quantitative Easing until “substantial progress” is seen. The pledge joins its signal to leave interest rates at zero through 2023.

Markets were initially disappointed with the lack of imminent stimulus but were encouraged by Chairman Jerome Powell’s overall dovish message. The bank reiterated its call for additional fiscal stimulus, with Powell stating the case is “very strong.”

Lawmakers on Capitol Hill have expressed optimism on agreeing on a relief package which President-elect Joe Biden described as a “down payment” ahead of additional spending under his rein. Talks could result in an accord as early as Thursday.

US jobless claims are on the docket and they are set to drop after jumping last week. Another sign of weakness in the world’s largest economy came from November’s Retail Sales figures, which fell by 1.1%, worse than expected.

The background is the coronavirus’s rage which is taking a toll on activity. On the other hand, optimism about a vaccine – the FDA is set to approve Moderna’s jab in the coming days – is boosting sentiment, as seen in forward-looking Purchasing Managers’ Indexes for December.

All in all, Brexit remains the dominating theme, with other developments being mostly positive for pound/dollar.

GBP/USD Technical Analysis

(Click on image to enlarge)

The Relative Strength Index on the four-hour chart is flirting with 70 – entering overbought conditions. While a Brexit deal would make the RSI obsolete, a short-term correction is on the cards. Momentum remains to the upside and GBP/USD holds above the 50, 100 and 200 Simple Moving Averages. All in all, any correction would allow for further gains.

The fresh 2020 peak of 1.3573 is the first resistance line to watch. It is followed by the round 1.36 and then by 1.3730, a critical level from 2018.

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