GBPUSD Extends Gains for the Second Day in a Row

Summary:
• After being agressively sold off on no-deal Brexit concerns, GBPUSD was able to recoup some of its losses as risk appetite picked up.

With volumes low for the holidays, GBPUSD extended its gains for two days in a row. The currency pair opened at 1.2991 yesterday. It then traded higher to peak at 1.3014 for the day. By the New York session close, GBPUSD had settled at 1.2991.

US-China Phase One Deal Progress

Yesterday, China made its first public confirmation of its phase one deal with the US. The Ministry of Commerce provided updates following the deal. It announced that it is in the process of proofreading and reviewing the legal terms of the initial agreement. It is also said that the country is planning a signing ceremony for when the deal is finalized.

This led to gains across most currency pairs as risk appetite picked up amid low trading volumes.

No-Deal Brexit Fears

In fact, even pound bulls were able to turn the other cheek against looming no-deal Brexit concerns. Remember that last week, the UK parliament approved Prime Minister’s Brexit plan. This means that the country will begin its divorce process from the EU on January 31 and will need to finish by December 31, 2020. Most market participants are skeptical that this will be enough time for the UK to negotiate a deal that would benefit its economy. And so, there are speculations that the country will end up with a no-deal Brexit.

Read our Best Trading Ideas for 2020.

GBPUSD Outlook

On the hourly time frame, we can see that GBPUSD has been on a short-term uptrend. The currency pair has been consistently making higher lows since December 23. In fact, when you draw the Fibonacci retracement tool from yesterday’s low to its intraday high, we can see that the currency pair has bounced off support at both the rising trend line and 61.8% Fib level.

Now, on the 4-hour chart of GBPUSD, we can see that gains on the currency pair are now limited by resistance on the 200 SMA. If there are enough buyers in today’s trading, a bullish close above yesterday’s high around 1.3014 could mean that GBPUSD is on its way to resistance at the 100 SMA around 1.3120. On the other hand, if sellers push prices below the rising trend line, a bearish close below today’s Asian session lows could mean that GBPUSD will soon fall to its December 23 lows at 1.2905.