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GBP/USD has dipped below 1.2865, a double-bottom recorded during October. While the break is yet to be confirmed, pressure is mounting after the UK announced a new lockdown, FXStreet’s Analyst Yohay Elam reports.

Key quotes

“Reports about progress on the sensitive issues of fisheries – perhaps due to a compromise from Paris – have been holding the pound from falling. However, this temporary reprieve may fizzle out. EU and UK negotiators have had their bouts of optimism but these were often followed by reports of disagreements and occasionally break up in the talks. Yet even if a deal between Brussels and London are near, sterling grapples with other issues.” 

“UK Prime Minister Boris Johnson announced a nationwide lockdown in England. Parliament is set to approve the restrictions designed to curb the spread of COVID-19 on Wednesday, paving the way for a month-long lockdown from Thursday. If confirmed by the House of Commons, the shuttering will take place just as the Bank of England announces its rate decision on ‘Super Thursday.’ The BoE could follow through on its talk and set sub-zero borrowing costs, further weighing on sterling.” 

“President Donald Trump continues trailing rival Joe Biden – yet the race is tighter in swing states than on the national level. Markets are eyeing a large stimulus bill, which would require not only a Biden victory but also for his party to win the Senate, where the race is closer.”

“Markets fear the prospects of a contested election – in which Trump declares victory before all the votes are counted and/or the race goes down to the wire or to the courts. Such concerns are boosting the greenback. While the greenback could fall in a relief rally, that would not happen until there is a clear result.”

“Below 1.2865, the next support lines were last seen in September and were stepping stones on the way up. These include 1.28 and 1.2770, and 1.2665. Some resistance is at 1.2880, which was a low point last week. It is followed by 1.2985, a wing high, and then by 1.3020.”