GBP/USD - A Correction on the Cards?
The pound has been on a decent run against the dollar, barely wavering in the run up to the Brexit deadline and holding on to gains after it passed.
While this is in part due to the improved fortunes that a Brexit deal brings, it's also largely attributable to the general trend of the dollar over the last 12 months. The greenback has been on a strong downward trajectory since late March but has found some support recently.
Higher yields in the aftermath of the Democrats' victory in Georgia has seen support return for the dollar. While Fed officials have tried to talk down the prospects of a tapering bond purchases or higher interest rates - which has slowed down the rise in yields - they still remain elevated and in turn, the dollar off its lows.
They may have more luck in the weeks and months to come but with President-elect Joe Biden pushing for a $1.9 trillion Covid relief package, investors may take some persuading.
Should cable break 1.35 - the first major test of support - it could trigger more gains for the greenback and a much broader correction in this pair.
Momentum has already dropped in the rally which could exacerbate any breaks to the downside. Of course, a break of 1.37 could change this but for now, the ground below is looking a little shaky.
While this is in part due to the improved fortunes that a Brexit deal brings, it's also largely attributable to the general trend of the dollar over the last 12 months. The greenback has been on a strong downward trajectory since late March but has found some support recently.
Higher yields in the aftermath of the Democrats' victory in Georgia has seen support return for the dollar. While Fed officials have tried to talk down the prospects of a tapering bond purchases or higher interest rates - which has slowed down the rise in yields - they still remain elevated and in turn, the dollar off its lows.
They may have more luck in the weeks and months to come but with President-elect Joe Biden pushing for a $1.9 trillion Covid relief package, investors may take some persuading.
Should cable break 1.35 - the first major test of support - it could trigger more gains for the greenback and a much broader correction in this pair.
Momentum has already dropped in the rally which could exacerbate any breaks to the downside. Of course, a break of 1.37 could change this but for now, the ground below is looking a little shaky.
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