- GBP/USD bears catch a breather around three-day low after marking the heaviest losses the previous day.
- UK PM Boris Johnson will meet European Commission Chief Ursula von der Leyen as October 15 deadline comes closer.
- Chatters over a two-week-long national lockdown gain momentum but rising UK Unemployment pushes Tories to rule out the close.
- BOE’s Haldane, Fedspeak and risk news are extra catalysts to watch.
GBP/USD struggles for a clear direction around 1.2935 while heading into Wednesday’s London open. While the US dollar’s broad run-up joined Brexit, coronavirus (COVID-19) woes to drag the quote down the previous day, traders await developments from the meeting between UK PM Johnson the European Union’s (EU) Ursula von der Leyen. Also challenging the market moves could be a lack of major data/events, other than already mentioned, except for the comments from BOE’s Chief Economist Andy Haldane and Fed policymakers.
Cautious optimism for Brexit?
Although neither UK’s David Frost nor the EU’s Michael Barnier said anything positive after recently failed Brexit talks, global markets compare Barnier’s “continue to work for a fail deal” with Johnson’s no clear threat to leave the trade talks while expecting a last-minute surprise. The market-positive sentiment also takes clues from the Tory leader Johnson’s recently easy talks with the bloc leaders and readiness to work towards the deal. Boris Johnson talked to Germany’s Angela Merkel and French Emmanuel Macron at the end of the last week and there was no negative news from the meet.
In contrast to the Brexit, the COVID-19 front is quite worrisome as the UK reported the highest new cases since June on Tuesday, with 143 deaths and 17,234 new confirmed cases. This pushes the opposition Labour Party to call for the national lockdown of at least two weeks but the previous day’s downbeat employment numbers push the ruling Conservatives towards local lockdowns. Hence, Northern Ireland is set for new restrictions while some parts of England are already under activity restrictions.
On the other hand, the US dollar retraces the previous day’s losses as markets rethink over the odds of no American fiscal stimulus ahead of the US elections and a halt in the major COVID-19 vaccine trials.
Against this backdrop, Futures in the US and UK are printing mild losses whereas Asian stocks trade mixed.
Moving on, GBP/USD traders will want BOE’s Haldane to reiterate his latest positive comments ahead of the Johnson-Leyen’s comments. Furthermore, comments from the Federal Reserve board member Richard Clarida and Randal Quarles will be watched to confirm the recent bearish bias portrayed by President and Chief Executive Officer of the Federal Reserve Bank of San Francisco Mary C. Daly.
Technical analysis
GBP/USD couldn’t crack 21-day EMA, an ascending trend line from September 25, which in turn joins bullish MACD to tease the buyers targeting 38.2% Fibonacci retracement of June-September upside, at 1.3013, while also keeping eyes on the August 24 low near 1.3050/55 during the further recovery. Meanwhile, a downside break of 1.2935 can target the 50% Fibonacci retracement level of 1.2868 whereas a joint of 200-day EMA and an upward sloping trend line from June 29, near 1.2780/75, can challenge the bears afterward.
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