GBP/USD: Open road to rally? French border easing may precede Brexit deal

• GBP/USD has been rising as panic over the new corid strain receded and France opened its borders.
• A Brexit deal may come within hours, but it all depends on fishery compromises.  
• Wednesday’s four-hour chart is painting a mixed picture.

The lorries are leaving – slowly at first, but the massive traffic jam around the British port of Dover is beginning to clear. France has eased the travel ban and agreed to allow goods to flow across the English Channel – provided drivers show a negative coronavirus test.

Paris shuttered the border on Sunday following Britain’s discovery of a highly transmissible COVID-19 variant that is raging through London. Scientists seem unanimous in saying that vaccines work against this new strain – which is probably circulating in the continent and has yet to be identified. The UK’s genetic sequencing s advanced.

Yet there is a political aspect to France’s harsh response to the strain panic – Brexit. The two neighbors have been wrangling over fisheries in the last mile of trade talks. Pictures of packed truck parks and endless traffic jams also serve as a warning to what would happen without a deal.

The fishing industry is minuscule, around 0.2% of both economies at best – and the differences in talks may be smaller after compromises from both sides. Chief EU Negotiator Michel Barnier needs to balance demands from Paris and Copenhaguen as well as those from his British counterparts.

UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen have been in close contact in recent days to resolve the differences.

All in all, there is optimism that both sides could find creative solutions to satisfy their fishermen and women – and not let a major accord fall due to a minor economic disagreement. Will it happen on Wednesday, ahead of Christmas Eve? That is far from guaranteed, as the only genuine deadline is December 31, when the transition period expires.

Brexit headlines are set to return to their dominant position as the coronavirus variant panic recedes. However, sterling could be impacted if the PM decides to add more regions to severe Tier 4 restrictions ahead of the holiday. The rapid spread seems to justify tougher measures, yet it would depress Brits and adversely impact sterling.

In the US, President Donald Trump seems to reject the stimulus bill that his Republicans and Democrats have fought hard for due to insufficient stimulus checks. House Speaker agreed with Trump’s demand to raise the payment from $600 to $2,000 and Republicans have yet to respond. Markets are mostly shrugging off this after-the-last-minute row, at least for now.

The US calendar is packed with data, including jobless claims, Durable Goods Orders, and others. They will likely move the dollar, yet the greater gyrations are set to come from Brexit.

See

• US Personal Income Preview: Dollar may decline on the reminder of dire straits yet timing matters
• Durable Goods Orders Preview: Long-term investment likely got a shot in the arm, dollar-positive

GBP/USD Technical Analysis

Pound/dollar is still suffering from downside momentum on the four-hour chart, but it has surpassed the 50, 100, and 200 Simple Moving Averages. All in all, bulls are gaining ground, but are not in control.

Resistance awaits at 1.3445, the daily high, followed by 1.3475, 1.3535, and 1.3622.

Support is at 1.34, the round level, and then by 1.3305, 1.3225, and 1.3190.

More  Three reasons to expect a sustained Santa rally for sterling