KonstantinAnissimov

Weekly Recap for Pound Sterling: November 22-29

FOREXCOM:GBPUSD   British Pound / U.S. Dollar
GBP/USD

GBP/USD opened at the pre-market of 23rd November at 1.3289; in Monday’s session the pair was rising strongly in the first part of the day and reached the day’s peak at 1.3398 between 13:00 and 13:15 UTC , being backed by positive U.K. preliminary November PMI figures. The manufacturing PMI was at 55.2 against the 50.2 market forecast, the services PMI was at 45.8 against 42.5, signaling a positive trend in the U.K.’s economy. However, cable fell sharply between 14:00 and 17:00 to 1.3264 against the backdrop of positive U.S. preliminary November PMI figures: the manufacturing PMI was at 56.7 against 53, the services PMI was 57.7 against 55.3. But the hourly candlestick between 16:00 and 17:00 UTC closed in a dragonfly with a long tail, providing a foundation for a bounce, which began right at 18:00 UTC , continuing in the late hours of Monday’s trading session and into the early Tuesday’s hours.

Climbing steadily up, the price reached 1.3339 at 8:00 UTC on Tuesday, 24th November, and rose to 1.3380 in less than two hours. But the gains did not hold, and the price slipped below 1.3300 from 9:00 to 15:00 UTC . But the local support level at 1.3294 sent the price up to the midrange of 1.3300 – 1.3400, where the pair continued trading until the end of the day. On Wednesday, 25th November, several comments relating to a possibility of a no-deal Brexit were made on both sides of U.K. – EU negotiations. That rhetoric transiently sent the price lower, but the market largely shrugged it off later in the day, continuing pricing in the probability of a no-deal Brexit as low. Eventually, cable closed Wednesday’s session at 1.3383.

With the lack of any important economic reports on Thursday and Friday, GBP/USD continued trading technically and with regard to Brexit-related developments. Michelle Barnier – the EU’s chief Brexit negotiator – arrived in London on Friday, 27th November, for in-person talks with the U.K. side. The rhetoric continued mixed on Friday. The U.K. PM Johnson said that Britain would prosper with or without a trade agreement with the EU; the U.K. chief Brexit negotiator David Frost insisted on the EU accepting the U.K.’s control over its fishing waters ; Mr. Barnier himself was quoted as saying that he did not know if a deal was possible at this stage. The chief result of Friday’s negotiations was Mr. Barnier’s plan to propose 15% to 18% of the fish caught in U.K. waters to be restored to the U.K. under the free trade agreement.

The market expressed its concern through downside dynamics prevailing in GBP/USD in the last two days of the week. The price edged down to 1.3330 on Thursday but recovered to 1.3350 near the close. On Friday, downside dynamics took the upper hand, driving the cross rate near the level of the week’s open. As a result, cable finished the week of 23rd November at 1.3305.

The week’s dynamics show the market’s mixed attitude on the ongoing developments in Brexit trade deal talks. The GBP/USD cross rate looks quite stout above 1.3300, the dipped below the 50 period simple moving average at the week’s close. The cable’s uptrend of the last few weeks remains intact. By the look of it on the daily chart , a slight price downslide looks probable and can be considered healthy.

Much of the GBP/USD price development during next week will depend greately on Brexit trade deal talks development. Judging by the rhetoric and Barnier’s proposal on fishing waters , it seems that a positive outcome remains a preferred option for both sides, which leaves good hope for cable bulls. Also, new COVID-19 cases are continuing to trend down, and with the expiry of the nationwide lockdown on 2nd December London will return to the less strict Tier 2 regime.

As for economic reports in the week of 30th November, there will only be the final November manufacturing PMI for the U.K. on Tuesday, 1st December; for the U.S., there will be the final November manufacturing PMI on Tuesday, jobless claims and final November services PMI on Thursday, 3rd December, and nonfarm payrolls on Friday 4th December.

GBP/EUR

Opening the week of 23rd November at 1.1218, GBP/EUR rose above the 1.1265 resistance level that was set on 3rd September 2020 and to the week’s high at 1.1278 between 15:00 and 16:00 UTC , being supported by the aforementioned upbeat U.K. preliminary November PMI figures and downbeat November PMI data from the EU, namely services PMI at 41.3 against the 42.5 market forecast and composite PMI at 45.1 against the 45.8 market forecast. Later on Monday, the price stabilised and closed above 1.1250.

With nothing notable happening on the front of economic data both in the U.K and EU for the rest of the week, the GBP/EUR price rate dynamics were dominated by the rhetoric coming from the Brexit front and technical factors. On Tuesday, 24th November, the pair continued sideways above 1.1250, temporarily rising above 1.1260. However, later in the day, the price edged lower to 1.1220, then rose back above 1.1250 but only for a few minutes and continued lower in the evening hours of the day, slipping to 1.1231 at the day’s close. The downside price action continued into Wednesday, with the pair sinking to 1.1190 at a local low between 11:00 and 12:00 UTC . A local recovery took the GBP/EUR pair to 1.1240 between 14:30 and 15:30 UTC but only temporarily, with the price being pressured by 50 and 20 periods’ simple moving averages.

The GBP/EUR cross rate remained largely capped under the two simple moving averages for the rest of the week, which, coupled with the mixed and downbeat Brexit rhetoric, eventually led the pair to a substantial price loss on Friday, 27th November. GBP/EUR was holding above 1.1200 until 10:00 UTC on Friday but was driven to 1.1170 in the next hour and from 1.1171 to 1.1119 between 16:00 and 17:00 UTC and closed the week at 1.1132.

The uncertainty around the Brexit trade deal was weighing heavily on the British pound during the week of 23rd November, being the primary motive force for GBP/EUR. Having slipped well below the 50-period SMA on the 4-hour timeframe on Friday, the pair risks going into a downside phase of price development.

The uptrend on the daily chart still looks intact, but if Brexit pressure continues to weigh on the pound during the week of 30th November, there might be a series of serious losses in store for GBP/EUR. The 1.1093 weekly support level is likely to be tested during the week of 30th November. Besides the Brexit trade deal, a package of important economic data from the EU will also shape the fundamental situation around GBP/EUR during the week of 30th November. On Tuesday, 1st December, there will be published the U.K.’s November manufacturing PMI and the EU’s preliminary CPI for November; on Wednesday, 2nd December, the EU’s unemployment rate will be released; on Thursday, 3rd December, the EU’s October retail sales, and November PMI composite will be released.

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