British Sterling is restricting the early London dip as the bullish momentum persists. The following 13 October GBPUSD Elliott wave analysis shares some technical insights.
October 13, 2020 / AtoZ Markets – GBPUSD gained over 40 pips in just 2 hours after the London market opened. The Sterling will primarily be driven by two main factors: US politics influencing the dollar and the October 15 Brexit negotiation. Technically, the currency pair is in a bullish correction which could head toward 1.32 before Thursday. A positive negotiation would then add to the bullish force thus building the possibility of challenging the 1.3485 top. However, a breakdown in negotiation would curse the continuation of the September bearish trend.
GBPUSD analysis: US Politics and Brexit trade deal
The October political atmosphere in the US has not benefited the dollar. The greenback lacked the momentum to build on the September recovery. Despite the White House not yet finding an agreement with the legislature, stock prices continued last week recovery. This shows that investors are optimistic that eventually, aids would be provided. The dollar therefore looks more vulnerable.
Meanwhile, the Brexit saga is also of utmost importance this week. The UK has threatened to walk away with no deal if negotiations are not successful on October 15 (Thursday). A no-deal Brexit is bearish for the Sterling. However, the EU has decided to debate on the Brexit development during its summit on the same day. Whether a deal will be struck or the UK’s threat won’t hold in case otherwise, remains unclear. There are three major scenarios. GBP will be positive if a deal happens. However, if negotiations break down, GBP would fall sharply in the short or medium term. The depth of the fall will be decided by the UK’s decision to schedule further talks with the EU or to walk away completely. The latter will be shocking and devastating for the Sterling across the board.
October 13 GBPUSD Elliott wave analysis
Technically, GBPUSD looks corrective from the 1.267 low. The dip from 1.385 to 1.267 completed a bearish impulse wave. In the last update, we used the chart below.
Wave 2 correction was expected toward 1.3088 and 1.3178 Fibonacci retracement levels. Eventually, the price broke above the intraday resistance zone and hit the 50% retracement level. The updated 13 October GBPUSD Elliott wave analysis below shows that there is more room for rallies.
The chart above shows a bearish scenario. One more leg to hit the roof of the channel is likely before the bearish run from 1.3485 continues. The technicals thus favor a breakdown in Brexit negotiation. But, we will have to see how the meeting ends on Thursday