GBP/USD Analysis and Talking Points
- GBP/USD Gains to be Capped
- UK/EU Trade Talks to Elevate GBP Volatility
- GBP/USD Bulls May be Caught Offside
GBP/USD Gains to be Capped
Today, the UK is due to release its mandate for the upcoming trade talks with the EU. However, as to be expected differences will be noted with the UK likely to refuse close alignment, which is likely to set up a clash with the EU. As such, upside in the Pound are likely to be capped and with speculative data (COT report) highlighting that traders are net long, risks are asymmetrically tilted to the downside.
UK/EU Trade Talks to Elevate GBP Volatility
|
UK Stance |
EU Stance |
|
No aligment over regulation |
Level playing field |
|
No extension of transition period |
Willing to have extension depending on the UK’s fullfilment of other obligations |
|
Control over fisheries |
Current equal access to fishing waters should be maintained |
|
Control over immigration |
No free movement of goods and services without the free movement of people |
| Change in | Longs | Shorts | OI |
| Daily | 12% | -21% | -1% |
| Weekly | -10% | -12% | -10% |
GBP/USD Bulls May be Caught Offside
Source: Refinitiv, CFTC, DailyFX
GBP/USD Technical Analysis
Once again, GBP/USD continues to hold the 1.29 handle, however, with a lack of buying interest above 1.3000, the pair has maintained its narrow range. Selling likely to extend on a break below support at 1.2882 (38.2% Fibonacci retracement.
GBP/USD Price Chart: Daily Time Frame
Source: IG Charts
— Written by Justin McQueen, Market Analyst
Follow Justin on Twitter @JMcQueenFX
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