- GBP/USD has kicked off the new year with extended gains as the Brexit deal is being implemented.
- Optimism about vaccines could be outweighed by the fast spread of coronavirus.
- Monday's four-hour chart is pointing to near-oversold conditions.
Hopes that 2021 will be better than 2020 may face an early reality check on the first working day of the year – sending sterling falling from the high skies. GBP/US has flirted with 1.37 as investors continue pushing the pound higher after the EU and the UK reached a Brexit deal on Christmas Eve. That may change.
Markets are happy to see Britain leave with a deal – that was also broadly approved by parliament – and prevents a harsh no-agreement exit. However, it is essential to note that the accord focuses on goods and skirts dealing with services – on which the UK is reliant.
Formally, Britain left the transition period on January 1, yet the long New Year's weekend pushed back most of the consequences to Monday, the first working day of the year. Traffic jams around Dover and issues for British businesses may begin appearing and weighing on the pound. Scottish demands to leave the UK and rejoin the EU may further weigh on sentiment.
The coronavirus front presents a similar picture – the worst has been avoided, but the reality remains grim. Regulators approved the University of Oxford/AstraZeneca vaccine late in 2020, adding to the green light for the Pfizer/BioNTech immunization.
The homegrown jab – which is available in large quantities and needs only normal cooling – will reach Brits' arms on Monday, yet its efficacy rate is only around 70% in comparison to 95% in the Pfizer/BioNTech and Moderna jabs. Moreover, the pace of vaccinations is slower than expected.
In the meantime, COVID-19 is raging in the UK due to the new contagious strain. Prime Minister Boris Johnson has been urged to announce a new nationwide lockdown, putting the whole country on the highest Tier 4 restrictions – or even new Tier 5 ones. Any announcement of new restrictions could weigh on sterling.
A similar slow pace of inoculations is seen in the US, which has suffered over 350,000 covid deaths. US virus statistics show some moderation, but they may be skewed due to the holiday season.
The focus in America is on Georgia, where Tuesday's two runoff races to the Senate will determine control of the upper chamber – and new stimulus. Democrats need to win both seats to have the thinnest of majorities.
All in all, optimism about UK prospects may suffer a blow and the safe-haven dollar could see some demand amid political uncertainty.
GBP/USD Technical Analysis
The Relative Strength Index on the four-hour chart is just below 70 – near overbought conditions. Upside momentum remains significant, yet off the highs. The pair remains above the 50, 100, and 200 Simple Moving Averages, a bullish sign.
All in all, cable has limited room to rise.
Resistance is at the daily high of 1.3703, which is also the highest since 2018. Resistance awaits at 1.3730 and 1.3810, levels last seen nearly three years ago.
Support awaits at 1.3620, a high point around Christmas, followed by 1.3525 that capped the pair last week. Further down, 1.3480 and 1.34 await GBP/USD.
More GBP/USD Price Forecast 2021: Cable braces for calendar comeback amid three exits
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD turns lower toward 1.1300 as US Dollar demand picks up
EUR/USD has come under renewed selling pressure and heads back toward 1.1300 n Monday’s European session. The upbeat market mood and a fresh US Dollar uptick undermines the pair amid a quiet start to a critical week ahead.
GBP/USD drops back below 1.3300 on US Dollar strength
GBP/USD returns to the red below 1.3300 in the European trading hours on Monday. Sustained US Dollar strength and easing trade tensions weigh negatively on the pair. Meanwhile, the technical outlook on the daily chart suggests a weakening bullish trend.
Gold price remains depressed below $3,300 amid signs of easing US-China trade tensions
Gold price maintains its offered tone through the Asian session on Monday and currently trades below the $3,300 round-figure mark, down 0.75% for the day. Despite mixed signals from the US and China, investors remain hopeful over the potential de-escalation of tensions between the world's two largest economies.
Bitcoin and Ethereum stabilize while Ripple shows strength
Bitcoin and Ethereum prices are stabilizing at around $93,500 and $1,770 at the time of writing on Monday, following a rally of over 10% and 12% the previous week. Ripple price also rallied 8.3% and closed above its key resistance level last week, indicating an uptrend ahead.
Week ahead: US GDP, inflation and jobs in focus amid tariff mess – BoJ meets
Barrage of US data to shed light on US economy as tariff war heats up. GDP, PCE inflation and nonfarm payrolls reports to headline the week. Bank of Japan to hold rates but may downgrade growth outlook. Eurozone and Australian CPI also on the agenda, Canadians go to the polls.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.