A bearish Wednesday for GBPUSD as Brexit uncertainties continue to weigh amid minor dollar recovery. The following 2 December GBPUSD Elliott wave analysis shares some technical insights.
December 02, 2020 / AtoZ Markets – Tuesday was very bullish for GBPUSD. The currency pair climbed to its highest price in two months. Much of the rally was due to a very bearish dollar and a better UK PMI. However, all of the gain has fallen back mid-day (12:15 GMT) on Wednesday. The price is currently around Tuesday’s low at 1.331. At the top was also a bearish reversal structure. This suggests more bearish pressure might build up around the GBP pairs in the second half of the week.
Negative Brexit headline drags GBPUSD toward 1.331
Brexit remains a very big concern. Much of the key points have been agreed upon, there are a few that are yet to be finalized including fishing and governance. The overwhelming market sentiment looks forward to a deal before the December 31 official deadline. However, the more/longer this dragging, the more we might start seeing a sharp decline toward 1.31 and maybe 1.30 for the GBPUSD in the short-term. EU chief negotiator Barnier has now said that the Brexit deal hangs in the balance as a result of the three unsolved issues. More developments expected in the coming days. A deal will still happen, whether in the last days before December 31 or even a few minutes before the deadline. However, negative and uncertain headlines like this will continue to put much pressure on the Sterling.
Aside from the Brexit, the US employment data on Friday will be in the spotlight. Market consensus expects 500k – lower than October’s 638k. The unemployment rate, however, is expected to drop to 6.8%. Aside from macroeconomics, the euphoria of the US stimulus package might put more pressure on the dollar. GBPUSD move will therefore depend on which is weightier in the coming days – Brexit or USD.
2 December GBPUSD Elliott wave analysis
GBPUSD hit a 2-months high at 1.3445. The current bullish phase from the 1.2678 low is quite corrective. However, the correction has been overstretched as a result of a continuous Brexit optimism prior to this week. From the 2 December GBPUSD Elliott wave analysis below, an ending diagonal pattern seems to have completed at the top of the corrective channel with top at 1.3445. A break below the 1.33 psychological level should be followed by a further decline toward 1.32 in the short/medium term.
If pessimism builds around Brexit or/and the dollar recovers sharply, GBPUSD will hit 1.31 easily. Sellers should also watch 1.29 and 1.2678 as other important support levels incase the dip gets faster and deeper.