GBP/USD is pushing upward, aided by a broadly weaker dollar. The pair is set to close a fifth consecutive day of gains to end the year out on a strong note.
The British pound was one of the strongest major currencies in 2019, advancing roughly 4% against the greenback this year. The Canadian dollar is on pace for the top-performing major currency spot in 2019. It has outpaced Sterling by just a fraction of a percent.
Much of the price fluctuation in GBP/USD this year is attributed to Brexit. Or more specifically, the market repricing of the potential of a no-deal Brexit.
Investor became confident in September that the UK will leave the EU with a deal after Johnson started making progress negotiating a divorce agreement with the EU. The currency pair currently trades about 10% higher from the low printed at that time.
The market tone was much different earlier in the year as Johnson’s constant threats of leaving without a deal put Sterling under relentless pressure. GBP/USD declined before Johnson became PM in anticipation and continued to decline shortly after he took office.
The pair once again came under pressure after the most recent election has Johnson once again brought up the potential of a no-deal exit. The pair has been recovering, however, for about a week, helped by a broadly weaker dollar.
GBP/USD was last seen attacking resistance at 1.3145 which held the pair lower yesterday. The pair is showing strength and the dollar is broadly weaker in the early day.
The next level of interest to the upside comes in at 1.3181 which is a level that offered some resistance earlier in the month.
The momentum is clearly to the upside as the exchange rate is set to post a fifth consecutive day of gains. Further, Sterling shows reversal signals against some of the cross rates in the early day which suggests potential for an acceleration of upward momentum over the near-term.
Volatility tends to be unpredictable during this time. Typically, fluctuations tend to decline in the last trading day of the year but there have been some years where traders have taking advantage of the low liquidity.
Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.