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GBP/USD: Corrective pullback eyes 1.3400 despite Brexit deadlock, virus woes in UK

  • GBP/USD keeps bounces off 1.3300 despite Brexit, virus concerns.
  • Bloc shows mild acceptance to the UK’s fishing terms, EU Chief Von der Leyen, UK PM Johnson eyed for resolution.
  • Fears of more British areas to be put under Tier 4 lockdown from December 26 gain momentum.
  • No major data from the UK but the US calendar remains populated, risk headlines remain as the key.

GBP/USD ticks up to 1.3375 while consolidating the previous three days’ downside during Wednesday s Asian session. In doing so, the Cable pays a little heed to The Telegraph headlines suggesting more lockdowns in Britain are on the way. Also challenging the corrective pullback is the Brexit deadlock that’s far from over.

EU’s VDL, UK PM Johnson have Brexit reins, more lockdowns ahead…

Although policymakers from the European Union (EU) and the UK have been sweating for months, the final touches are in the hands of European Commission President Von der Leyen (VDL) and UK PM Boris Johnson. The latest Brexit chatters suggest the bloc is up for comprising 25% of its existing €650m of quota rights in UK waters for six years. Though, disagreements over the details require the EU and the UK leaders to step in.

On the other hand, the Telegraph came out with the news confirming the rumors that the government had been mulling the idea of more stringent activity restrictions on Tuesday. “The announcement is likely to come on Wednesday following a meeting of the Covid-O operations committee and government sources have warned of the rising risk of a full national lockdown in the New Year,” said the news.

It should also be noted that the US dollar’s rally and the recently increased risks of the US-China tussle and the America-Russia tension offer extra hurdles to the GBP/USD recovery moves.

Against this backdrop, Wall Street closed mixed and the US 10-year Treasury yields marked losses of nearly two basis points (bps) by the end of Tuesday’s North American trading.

Looking forward, Brexit and virus variant are the two major catalysts to watch for the GBP/USD traders while US data concerning Durable Goods Orders and Michigan Consumer Sentiment Index can offer intermediate moves.

Technical analysis

Having breached 21-day SMA, GBP/USD sellers are targeting a 50-day SMA level around 1.3225. However, any further downside will be probed by an ascending trend line from November 02, at 1.3210 now. Meanwhile, an upside clearance beyond 21-day SMA, currently around 1.3395, need to cross the early-month high near 1.3540 to recall the buyers. 

 

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