GBPUSD WEEKLY ANALYSIS – Pound’s Rally In Questioned; Brexit Woes Remain

GBPUSD WEEKLY ANALYSIS – Pound’s Rally In Questioned; Brexit
Woes Remain     

Following the previous report on GBP/USD, the pair gained strong
bullish momentum, breaking above its 61.8 Fibonacci level near 1.2700 and the
psychological resistance at 1.3000. The pair later found rejection from its
January resistance near 1.3250, retracing back to its 20-MA line (red). However,
the downward pressure was short-lived as the pair now retests the 1.3250
resistance. A breakout above the resistance suggests the pair to extend its
gains towards the 100.0 Fibonacci level at 1.3470, the level last seen since
December 2019.       

In terms of MACD, bearish momentum has weakened but persists,
indicating potential technical correction for the pair after its strong rally
throughout July. Supporting a technical correction is the over-extended gap
between the 20-MA (red) and 60-MA (green), where the current resistance level
plays an important role in determining the pair’s near term movement. Failure
to break above that level could potentially send the pair into a consolidation
zone between 1.3000 and 1.3250; Or a strong technical correction towards its
60-MA line near 1.2800.    

From the fundamental front, the GBPUSD rally was mainly supported by
the weakness in the dollar. Struck by the pandemic’s impact, and tensions
within the US government in implementing new stimulus had dragged the dollar to
its lowest level since May 2018. Lack of confidence in the world’s strongest
economy led investors into alternative markets such as the euro and the pound,
where economic recovery in other countries are more convincing.  

Aside from the uncertainties arising from the US, investors’ focus
is now returning towards the UK’s major economy problem: Brexit. After talks
were stalled amid the pandemic, the UK and EU are now resuming to strike a deal
before the December 31 deadline. However, the situation is turning gloomy as
little time is left for negotiations. Fishing rights and post-Brexit
competition remain the sticking points for Brexit, where negotiators will meet
again on Friday to discuss these issues.   

As a summary, the long-term trend for the pair remains
bullish-biased. However, a change in fundamentals such as Brexit updates might
affect the movement for the pair.