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The GBP/USD exchange rate is seen to be recovering from the falls suffered at the start of the week, however strength will likely remain fleeting says analyst Richard Perry of Hantec Markets.
As with EUR/USD there has been a mild tick higher on GBP/USD as the strength of the dollar rally has just eased in the past 24 hours.
However, this is likely to be another chance to sell as the growing medium term pressure on 1.2650 support builds.
The trend lower of the past three weeks comes in around 1.2825 today and there is a near term pivot around 1.2860 which we see will likely contain a rally before downside pressure renews.
Momentum indicators are far more negatively configured on a medium term outlook now, but are just beginning to tick back higher again.
This near term rebound should be seen as a chance to sell.
We expect this week’s low of 1.2670 to come under further pressure and how the market reacts around 1.2650 (which is a breakout support band of old highs) will determine whether this move goes much deeper towards 1.2480 and possibly 1.2250 in due course.
Above 1.2860 would improve the near term outlook, but the bulls need above 1.3000 to really push ahead once more.
The past 24 hours have just seen a slight pause in the recent risk negative/dollar positive move across major markets.
It comes as some chinks of light start to form in the will they/won’t they saga of a US fiscal support package.
The Democrats have drafted a $2.4 trillion package that want to negotiate on and potentially hold a vote next week. It would be another shift in the risk narrative and help to improve sentiment once more if it is achieved.
Wall Street closed a choppy session last night in positive territory, whilst futures are again pointing higher today.
It comes with the dollar rally also on pause. The question for traders is whether this is a consolidation for the dollar strength before a further surge, or a reversal.
Newsflow on this US fiscal support package will certainly have a part to play.
It comes with other greenshoots of good news on Brexit trade negotiations, where the foundations of another round of negotiations have been laid for next week.
However, news of the development of COVID second wave infections and the response of authorities over social restrictions could be the difference as to whether we move into a new trading week with positive risk appetite.
For today, a mild positive bias, but will the weekend change all of this?