GBP/USD Price May Face a Highly Volatile Week

GBP/USD Price May Face a Highly Volatile Week

The stock market closed the last week in the red after testing their highest levels ever, while the GBP/USD traders remain attentive to the EU-UK negotiations.

Beyond Sunday

The EU and UK missed another deadline and therefore extended their negotiations aiming for a potential breakthrough. However, the clock is ticking and chances of closing a last-minute deal are becoming lower. Thorny issues as level playing field and fisheries have impeded both sides from reaching a free trade deal and if they could not put their discrepancies aside before the end of 2020, they would revert to the World Trade Organization’s roles.

Keep the Virus in Check

The second wave of the coronavirus forced German authorities to instruct non-essential stores to shut down and urge school children to stay home to keep infection rates under control. The story does not look different in the US as similar measures have been taken in New York.

Stalled Talks

The US main indices like the Dow Jones and the S&P500 hit last week a new all-time high fueled by the expected vaccine’s approval from the FDA and talks about a new stimulus package of $916 billion however, the price traded lower and closed the weekly candlestick in the red as the bipartisan talks stalled on disagreement on state’s and local government aid.

Stock Market

Change %

S&P 500

-0.2%

Dow Jones

-0.03%

NASDQ

-0.2%

Japan 225

-0.4%

DAX 30

-1.1%

FTSE 100

-0.5%

CAC 40

-0.4%

Table source: CAPEX WebTrader

EUR/USD and Main FX Markets

The ECB modified its monetary policy on Thursday meeting by increasing the Pandemic Emergency Program (PEPP) by 500 Euros and extended it until March 2022, the central bank also extended the Targeted Longer-Term Refinancing Operations (TLTROs) by 12 months until June 2022 and the amount banks can get from the ECB was increased by 55%. The ECB meeting did not move the needle on the EUR/USD as the market priced in these measures beforehand. On the other hand, the market awaits the last Fed meeting of 2020 on Wednesday to know if the central bank will ease its monetary policy like its European counterpart.

Technically, the price signaled the bullish momentum as the pair failed on multiple occasions to move to a higher trading zone therefore, the market could be on the way for a test of the low end of the current trading zone 1.1909 - 1.2148.

The EU-UK trade deal talks remain the main driver of the GBP/USD, on Friday the UK and the EU commissioner stated that the no-deal scenario is a strong possibility and this sent the price to its lowest level in nearly four weeks at 1.3133. The market opened this week with an upward gap as the EU and the UK agreed to extend talks to achieve a trade deal.

Technically, the pair remained in the current trading zone 1.3185- 1.3460 therefore the price could be on the way for a test of the high end of the zone at 1.3460.

Gold and Oil

The oil price broke above the $50 barrier last week in hopes that the coronavirus vaccine would lead to normal life recovery and increase the global demand in the coming quarter/s. That said, the price/RSI negative divergence highlights the possibility of the bullish momentum reversal. The Brent Crude could trade towards the low end of the current trading zone 46.47 – 50.50.

The Gold failed last week to test the 50-day moving average and retreated towards a lower trading zone of $1,796 - $1,861. Hence, the price could be on its way for a test of the low end of that zone at $1,796. A daily close below that level could send the yellow metal’s price even lower towards the monthly resistance level at $1,747 (the April 2020 high).

Looking Ahead

Not much today on the economic calendar markets will wait for the Eurozone industrial production of October at 11:00 AM (GMT time).

Sources: Bloomberg, Reuters

This information/research prepared by Mahmoud Alkudsi does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.

The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).

The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest. The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.

JME Financial Services (Pty) Ltd trading as ZA.CAPEX.COM acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via ZA.CAPEX.COM, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15. Magnasale Trading Ltd is the principal to the CFD purchased by investors