EU/UK Trade Talks and GBP/USD Price, Analysis and Chart:
- European Council Meeting on October 15-16 is key.
- Both sides are making positive noises but remain far apart.
The EU and UK trade negotiating teams will be hard at work next week trying to iron out the many differences that they currently have against a time-constrained backdrop. The EC meeting starts on Thursday next week and the EU have always pointed to this meeting as the last chance to get a deal done and then ratified before December 31. UK PM Boris Johnson has also chosen October 15 as the last day to see if a deal can be struck between the two sides before talks go down the WTO-route. Flexibility remains the key in these talks and these deadlines may well be flexible if both sides believe a deal can be struck. Both sides are making appeasing sounds but reiterate that the other side has to ‘move more’ before a deal can be made. The markets currently see a better chance than not of a deal taking place, although it may just be a bare-boned no tariff deal to make sure trade flows are uninterrupted from the start of next year.
Sterling currently trades around 1.3000 against a weak US dollar and is approaching initial resistance off the 50-dma at 1.3022. The CCI indicator suggests the pair are overbought but with a potentially volatile period ahead next week, the pair can become extremely overbought or oversold in a short-space of time.
GBP/USD Daily Price Chart (February – October 9, 2020)
| Change in | Longs | Shorts | OI |
| Daily | 1% | 4% | 2% |
| Weekly | 8% | -3% | 4% |
IG client sentiment datashows 45.10% of traders are net-long with the ratio of traders short to long at 1.22 to 1.The number of traders net-long is 1.88% higher than yesterday and 12.76% higher from last week, while the number of traders net-short is 1.07% higher than yesterday and 14.58% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD trading bias.
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