GBPUSD is breaking above a major resistance again in December. Will the breakout be sustained this time? The following 17 December GBPUSD Elliott wave analysis shares some insights.
December 17, 2020 / AtoZ Markets – The Sterling is one of the most volatile currencies in the FX market since November. This is largely due to the Brexit impasse. After attempting a break away from the 1.35 psychological level, GBPUSD returned downwards last week to hit 1.313. However, the bulls returned this week with a 150 pips gap and have maintained the momentum with eyes on the 1.36 level. Spotlight will be on the BOE on Thursday as the market looks for clues amid Brexit and other geopolitical factors. Currently, GBPUSD is trading at its highest price since late April 2018.
Brexit and Dollar weakness spark Cable bulls
The dollar weakness since March has been the major factor lifting the Cable in the long term. However, the intraday instabilities of the bullish move is underlined by the Brexit headlines. GBP pairs have been flowing in the direction of the Brexit headlines. However, looking at it from the bigger picture, the overall sentiment has been bullish for the bulls. We can therefore say that the market expects a Brexit deal to go through. It seems we are getting closer this week than the last. Although the three battlegrounds – governance, level playing ground, and fishing are yet to be resolved and a deal is yet to be formally done, there has been some progress in talks. The European Commission leader and the UK PM have both expressed optimism. Until a deal is done or not, the Brexit risk will remain. Meanwhile, one can ignore the rumors and headlines as a deal is most likely – a case of ‘buy the rumor and sell the fact’.
If the Brexit optimism is maintained, we should see GBPUSD gain further. Although a Brexit deal might have been more priced-in than a no-deal, the dollar weakness across the board shows the currency pair is capable of more rallies. The current risk appetite could extend till the last days of December. From late December and January, the results of the vaccine might be one of the next concerns for traders and investors. If the vaccines work as expected in the UK and US/Canada (if the roll-out starts in December as reported), user confidence will rise and thus will investors’. USD weakness should then continue. Otherwise, a sharp dollar rebound is much likely.
17 December GBPUSD Elliott wave analysis
The weekly 17 December GBPUSD Elliott wave analysis chart above supports further rallies toward 1.4. A long term bullish diagonal pattern completed at 1.142. A 3-wave bounce should follow at least to 1.6 in the long-term. This means that GBPUSD has a bullish outlook for the next 1-3 years.
On the daily chart above, the rally from 1.14 looks like a leading diagonal developing. We might see another slow-down at the peak toward 1.14 and then a corrective collapse to 1.25 in the first quarter of 2021 before the bullish trend continues.