GBPUSD - Brexit talks enter crucial phase, more rumors and expectations

We heard a rumor yesterday that came from Ireland where the local Prime Minister spoke positively about the negotiation process, referring to the fact that the deal already has an outline and key issues regarding fishing and competition are being resolved.

Leo Varadkar expressed his opinion that it is possible to conclude an agreement before the end of the week, which was perceived by market participants skeptically.

According to European Commission President Ursula von der Leyen, the coming days will be crucial for trade negotiations with the UK and fundamental differences between the two sides will remain.

"To be honest, I can't tell you today if there will be a deal. There are still three issues that can incline to a deal or reject it," she said to the European Parliament in Brussels.

Von der Leyen noted the main topics that have plagued the negotiations from the very beginning such as: equal conditions for business, compliance with any agreement and access to British waters (the so-called fish issue).

In fact, the head of the European Commission dispelled hopes that there is success in the negotiations. The key issues are still there which means that crucial days can turn into weeks if the parties do not make concessions.

Investors are not tired of such an ambiguous approach and tight deadlines can lead to the activation of speculative positions, which will lead to chaotic price jumps without a solid direction.

Given the new information, we have fear that may result in a weakening of the pound.

In terms of technical analysis, the GBPUSD quote follows between two price levels at 1.3300 and 1.3400, without any signs of a drastic change. Traders tend to believe that the market is accumulating and speculators expect something more than just rumors from the information flow.

Thus, the strategy of waiting for a clear fixation outside the established boundaries is considered the best tactic for the near future, active traders call it "catching the main impulse".

For the market dynamics, there is a slowdown in the rate of volatility. The activity indicator for November 24 was 87 points, which is 27% below the average level. In fact, we have returned to the deceleration hypostasis that haunted us during the past week.

Looking at the trading chart in general terms (daily period), we can see that since September 24, the market has been dominated by upward interest, which led to almost complete recovery of the pound relative to the decline of 1.3480 to 1.2675.

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Today, we do not have statistics for the UK but the United States has something to pay attention to according to the economic calendar.

At 13:30, I will publish the second estimate of US GDP for the third quarter, where the rate of economic decline may slow from - 9.0% to - 2.8%, which may give optimism to dollar positions. The quarterly estimate reflects GDP growth of 33.2%, the first estimate reflected growth of 33.1.

The US labor market is following with GDP and we expect another reduction in the volume of applications for unemployment benefits, which may also have a positive impact on the dollar

  • Initial applications may be reduced from 742 thousand to 730 thousand.
  • Repeated applications for benefits may decrease immediately by 372 thousand, from 6,372 thousand to 6,000 thousand.

If the statistical data will match and the information will not pop up eventually, for example, on Brexit, then taking into account the existing expectations, the dollar will hold its position.

Analyzing the current trading chart, you can see that at the time of the information from the head of the European Commission, Ursula von der Leyen, the pound began to lose its positions, and eventually returned to the level of 1.3300.

We can assume that market participants will continue to focus their trading forces between the price levels of 1.3300 and 1.3400, but the longer the quote stays in one place, the sharper the exit from the range will be.

Trading tactics will remain as before, waiting for a clear price fixing outside of one or another border (1.3300 / 1.3400) based in the four-hour period may indicate a local move towards the breakdown of the range.

It is worth noting that the information flow continues to affect the dynamics of the quote, so don't forget to track the latest topics for new information: Brexit and Covid

Information about hot topics can be extracted both from our Analytics site and from the media, for example, bloomberg.

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Indicator Analysis

Upon analyzing the different sectors of timeframes (TF), it is clear that the indicators of technical instruments on the minute and the hour periods have a variable signal due to the price movement in the range of 1.3300 / 1.3400. The daily period, as before, is focused on an upward move, signaling a purchase.

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Volatility for the week / Measurement of Volatility: Month; Quarter; Year

The measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.

(November 25 was based on the time of publication of the article)

The Dynamics of the current time is 80 points, which is even lower than the average level by 33%. Acceleration will occur as soon as one or another limit of the set range falls.

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Key levels

Resistance zones: 1.3400 *; 1.3480; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.

Support areas: 1.3300 **; 1.3175 (1.3200); 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

I advise you to read the articles:

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GBPUSD-impact: COVID, BREXIT, Trump & Biden on speculators

Trading recommendations on the currency market for novice traders - EUR USD and GBP USD 11/25/20

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