November has been an excellent month for the Pound. The GBP/USD opened November at 1.29224, reached a high last week of 1.33125, then ran into resistance and retreated a bit to 1.32000.
Current Pound strength could be in jeopardy as the self-imposed November 15 deadline reached no Brexit agreement. David Frost, the UK chief Brexit negotiator, said yesterday renewed talks of a trade deal with the European Union may not succeed, but he was still hopeful of a resolution. Frost is quoted as saying, “We also now largely have common draft treaty texts, though significant elements are of course not yet agreed,” he said. “We will work to build on these and get an overall agreement if we can. But we may not succeed.”
The Pound had a lot going for it with coronavirus vaccine news and knowing for certain US President-elect Joe Biden would take over the White House next January.
But now again with Brexit negotiations not offering more predictability, this is weighing at the moment. Last week saw US Treasury Yields do very well which favoured the Dollar. US coronavirus cases are not going down; they are rising and providing safe-haven flow to the USD.
Technical analysis shows bulls are in control but have a lot of work to do with the surrounding noise of Brexit and coronavirus. The first hurdle is to stay above the 1.32000 area and then get through the first resistance of 1.32330. Strength must continue through the second resistance level of 1.32520 from last week to confirm a run back up. On the downside, there is some room to roam with 1.31380 as first major support.
As always, Brexit negotiations make the Pound choppy so watch for this in the upcoming week. From news reports, it does not appear a deal will be coming through yet, and this leans toward more Pound weakness if it holds. The long term view for the Pound is not bad; it is simply that current events show some negative weight. All it will take is a positive Brexit leak, and surely a big pop is ready.
GBP/USD key levels:
Support: 1.3138 1.3081 1.3052
Resistance: 1.3223 1.3252 1.3309