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COVID cases are rising in the UK forcing government officials to consider tougher restrictions. Ministers review whether tier 4 restrictions will be enough to contain the spread of the virus. Boris Johnson put England on Alert for tougher COVID restrictions as the government race to deploy the vaccine.
The Pound rallied into the end of the year due to the post-Brexit trade deal. It seems that the deal was largely priced in by investors during November/ December. It's interesting that the Pound did not rally more forcefully on the emergence of the trade deal, using market sentiment as a tool, could mean price may swing back the other way.
GBPUSD is over extended at current prices. Tighter restriction fears coupled with "no Brexit rally" price action sets up the Pound for a nice pullback in my opinion. However in the medium term, loose monetary policy should continue to see the US Dollar weaken against it's major counter parts.
1.3700 could be a nice resistance line to sell against. It's the Marc 2018 low and September 2017 high, key weekly resistance. If there is signs of bearish evidence in this area then price could fall towards 1.3500.
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