The British pound has rallied significantly during the trading week, breaking above the 1.3250 level. However, the market has given up some of the gains at the very end of the week, perhaps as people are curious as to what is going to happen with the Brexit deal, or possibly the lack of. After all, the market is going to continue to see a lot of questions around how Brexit works out. People are pricing in the possibility of some type of deal, and for what it is worth Citigroup has suggested that there is about an 80% chance of an agreement. This has been driving the British pound higher over the last several months and seems to be picking up yet again. Having said that, it is worth noting that there is still a chance that they do not come to some type of deal. If they do not, the British pound is going to fall rather hard.
GBP/USD Video 23.11.20
Over the course of the next couple weeks we should get a bit more clarity, and I think a bigger move. The 1.30 level underneath should be supported, unless of course we do end up with some type of “no deal Brexit” situation, which then would almost certainly have this market crashing right through it. I believe short-term pullbacks probably offer buying opportunities, as the next couple of weeks will be somewhat tense. There is most certainly a bigger reaction to the downside than the upper right now, meaning that if we get some type of agreement, it will probably send this market to the 1.35 handle again. However, if we do not have an agreement who knows where we end up?