Daily Market Recap - GBPUSD At Critical Junction

The British Pound rose against the US Dollar on Tuesday after initially falling towards the 1.36 handle during the European session. The GBPUSD has since recovered significantly off of its 20-day moving average and is now up over 0.40 percent around 1.37 nearing the daily close.

Risk appetite has taken a turn for the better today after Mondays jitters and helped support the GBPUSD. US stocks have opened in the green while the Eurozone equities have recovered some of their losses from the start of the week. Crude oil is also up while treasury yields have increased. Typical safe-haven currencies such as the JPY, CHF, and USD are all trading down while riskier currencies are moving higher.

On the economic calendar, UK labor figures were released today and came in slightly better than expected. The consensus on the number of claimants for December was set at 35k whereas the actual amount was much lower at 7k. Furthermore, the UK ILO unemployment rate over the past 3 months is standing at 5 percent versus expectations of 5.1 percent. The figures suggest a better economic climate in the UK compared to the forecast, helping to support the Pound.

Meanwhile, positive vaccine news from Moderna, Pfizer, and Johnson & Johnson further lifted the outlook in the coming year. Moderna and Pfizer announced they will be looking into providing booster shots designed to be taken 6-12 months after the second dose. Johnson & Johnson are set to announce a game-changing vaccine that would require only one dose for full immunity. The encouraging developments on the vaccine front are likely stirring some buying demand in the riskier assets.

From a technical perspective, the GBPUSD is reaching a critical point as it closes in on the 2018 swing low level around 1.375. The pair has climbed over 5 cents in the past three months and has been setting back to back multiyear highs in the process. Should the pair manage to close firmly above the 1.375, it may provide sufficient impetus for buyers to rally even further once they are content with the new support level.

(Chart Source: Tradingview 26.01.2021)

A breakout beyond this point will set the new upside target at the psychologically significant 1.40 handle. On the flip side, failure to make significant inroads above 1.375 will likely push the pair into consolidation around the 1.37 mark in the near term as buyers reassess their position. The range for the GBPUSD should fall between 1.36 and 1.38 in the coming sessions.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.