GBP/USD has veered from its typical correlation with the equity markets that has been dominant as of late and has broken above 1.2500. The price point had been a hurdle over the past three sessions, causing range type trading.
It remains to be seen if the bullish near-term range break in GBP/USD will be sustained as volatility has slowed notably. The S&P 500 trades mostly unchanged in the pre-market after posting a loss of just over 1% yesterday. The greenback is also unchanged against several of its major counterparts shortly after the European open.
A rise in Coronavirus cases in Southern US has weighed on risk sentiment which appears to be the main driver for both equity and currency markets at the moment. GBP/USD traders are also mindful of Brexit developments as the clock is ticking with the end of the year deadline for the UK to reach an agreement with the EU approaching quickly.
On Tuesday, EU negotiator Michel Barnier commented that the EU wants an agreement but is not willing to do so at any price, showing his frustrations in the lack of progress in trade negotiations. UK Prime Minister Boris Johnson warned German Chancellor Angela Merkel that the UK stands ready to leave without a deal if they are unable to come to an agreement.
The session ahead may reveal if the bullish break in GBP/USD is signaling the start to a more meaningful move
Dips in the pair should be bought ahead of the 1.2500 level with the 1.2520 price point seen as the first level of support if the pair were to sustain the upward moment.
A potential upside target, if the pair can hold above 1.2500, is seen at 1.2643. The same level had proven to be a major hurdle for GBP/USD in April with two failed attempts at that time.
In the event GBP/USD turns lower from here, a break of 1.2500 exposes prior support at 1.2450.
- While several of the major currencies are confined to a range since yesterday, GBP/USD has made a strong push higher from a 3-day range.
- While above 1.2500, the pair appears poised to retest April highs near 1.2643.
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This article was originally posted on FX Empire
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