FX.co ★ Outlook for GBP/USD. Speculators price in news about trade agreement

Outlook for GBP/USD. Speculators price in news about trade agreement

After 4.5 years of tense negotiations, politicians have almost reached the agreement.

Yesterday, representatives of both parties said that the UK was ready to make further concessions to the European Union concerning the fisheries issue. According to the source familiar with the situation, Boris Johnson agreed that the share of fish caught by EU vessels in UK waters should decline by 25% in the following five years. Initially, the UK demanded a drop of 80% in just 3 years. Then, it proposed to cut the share by 30%, but the block opposed this idea.

Boris Jonson's active participation in the talks allowed the politicians to solve the thorniest issues. Recently, the UK had to make concessions all the time.

In fact, the deadline for a Brexit deal is just in seven days. Even if the parties manage to come to a consensus, the project should be ratified by the UK Parliament and the EU Parliament. They may not have enough time to do this.

Notably, today is Christmas Eve. Germany has already gone on holidays and most other countries have a short day today. Tomorrow is an official holiday and markets will be closed.

Thus, there is only one question: when they will ratify the deal?

Yesterday, the pound sterling jumped by 1.5% amid expectations of a positive outcome of the Brexit talks. This is a significant jump even amid such high market activity.

The price was hovering near the local high of the mid-term uptrend. This points to the fact that speculators do not take into account the fact that the British pound is overbought. They also almost ignore signs of pressure on the quote.

Notably, the pair has been trading at the levels logged in 2018 for three weeks already. Significant changes may take place, if the price breaks the level of 1.4300. In this case, the quote will move to the levels logged in 2016.

The pair may change the long-term trend.

Curiously, the market has been under the influence of news flow for a long time already. Traders ignore such fundamental factors as the UK's deepest recession, virus-induced crisis, and a new strain of COVID-19.

The trade agreement is extremely positive news. However, traders may soon realize that the pound sterling is significantly overbought. After that, the British currency may slump.

Recently, the market dynamics has been above 100 pips. This week, volatility has exceeded 200 pips.

Outlook for GBP/USD. Speculators price in news about trade agreement

At the moment, markets are looking forward to the press conference. Boris Johnson and Ursula von der Leyen are expected to unveil details of the deal. Since the beginning of the day, the pound sterling has advanced by more than 110 pips. If the deal is signed and ratified, the currency may continue gaining in value reaching the levels of 1.3650-1.3700. If the price consolidates above 1.3700 on the four-hour chart, it may hit the level of 1.4000 amid positive news flow.

In any case, it is recommended to monitor fresh news about Brexit as any changes may lead to higher speculative activity.

Positive news will boost the pound sterling whereas negative information may lead to its depreciation.

To keep abreast of the latest news, you can read our Analytics section, or browse such websites as Bloomberg, Wall Street Journal, and Reuters.

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Outlook for GBP/USD. Speculators price in news about trade agreement

Indicator analysis

Analyzing various time frames, we can see that technical indicators provide us with a buy signal due to a sharp rise.

Outlook for GBP/USD. Speculators price in news about trade agreement

Volatility for the week/Measurement of volatility: month, quarter, year

The volatility measurement reflects the average daily fluctuation calculated for a month/quarter/year.

At the moment, dynamics is 115 pips. However, it is not the limit. Acceleration is still possible amid fresh news about the trade deal.

Outlook for GBP/USD. Speculators price in news about trade agreement

Key levels

Resistance levels: 1.3650**; 1.3850; 1.4000***; 1.4350**.

Support levels: 1.3300**; 1.3000***; 1.2840/1.2860/1.2885; 1.2770**; 1.2620; 1.2500; 1.2350**; 1.2250; 1.2150**; 1.2000*** (1.1957).

* Periodic level

** Range level

***Psychological level

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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