GBP/USD forms ascending triangle ahead of key Brexit deal decision
- The GBP/USD is heading for the fifth straight week of gains ahead of a potential Brexit deal.
- The pair has formed an ascending triangle pattern on the daily chart.
- US nonfarm payroll numbers will also be in play today.
The GBP/USD is heading for the fifth consecutive weeks of straight gains as traders remain optimistic that the United Kingdom and European Union will reach a Brexit deal. Further, the recent decision by the UK to approve a vaccine and the relatively weaker US dollar have boosted sentiment on sterling.
Important day for Brexit
On Wednesday, Michel Barnier, the chief EU negotiator warned that the next 36 hours would be decisive. This timeline ends today, meaning that we will possibly get the outcome of the ongoing talks today.
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Generally, in the past few months, the two sides have made strong progress on most issues. But two things have become potential hindrances. On fisheries, there is strong disagreement on how the situation will remain after Brexit.
While the UK made some concessions this week, France threatened to veto any deal that reduces its access to British waters. There are also issues about regulations and government support for companies. Still, according to sources, there are hopes that the two sides will reach a deal by the end of the month.
Generally, traders believe that a no-deal Brexit will be a negative thing for the UK and the GBP/USD. That’s because the significant volume of trade between the UK and the EU. Also, disruptions in trade will have an impact on employment and supply chains.
US nonfarm payrolls ahead
The weaker US dollar has also helped push the GBP/USD higher this week. Indeed, in general, the dollar index is trading at the lowest level since February, 2018.
Therefore, the pair will also react to the nonfarm payroll numbers that will come out at 13:30 GMT. Economists believe that the pace of hiring slowed down in November as the country battled the rising number of the virus. Several states like California and Oregon announced stay-at-home orders during the month.
Therefore, economists polled by Reuters believe that the official nonfarm payrolls rose by 469,000 in November. That will be a smaller increase compared to October’s reading of 638,000. Additionally, they believe that wages rose by 4.3% while the unemployment rate fell to 6.8%.
GBP/USD technical outlook
According to most forex brokers, the GBP/USD is trading at 1.3450, which is a few pips below yesterday’s high of 1.3483. This was an important price because it was also the highest level on September 1.
On the daily chart, the pair is forming an ascending triangle pattern. In technical analysis, this pattern is usually a bullish sign. Therefore, there is a high probability that the price will ultimately break-out later today. If it does, the next level to watch will be the psychological level of 1.3600.