FX.co ★ Analysis of GBP/USD for December 21, 2020. No Trade Deal and New Coronavirus Strain in UK Sentenced Pound

The section of the trend, which originates on September 23, finally took a five-wave form. With that, the view is quite complete. Of course, the wave layout can become more complicated once again, as it has done more than once, but at the moment everything looks like a complete wave structure. If this is indeed the case, then the decline in quotes will continue within the new downward trend section with targets located near the 30th figure, and possibly lower.

The lower chart clearly shows wave 5 in 5 of the upward trend section, which updated the maximum of the previous wave 3.Thus, the construction of the upward trend section can really be completed. If this assumption is correct, then the decline in quotes will continue within the expected wave "a". Until a successful attempt to break the maximum of the current wave 5 in 5, the working option will be the option with the construction of a downward trend section.

For a long time, the key topic for the pound was Brexit and trade negotiations. However, the markets were waiting for any information a month ago. Instead, Ursula von der Leyen, Boris Johnson, and the heads of negotiating delegations continued to feed the markets bread and as a result, 10 days before the end of the transition period, there is still no deal, and London and Brussels continue to consult with each other as if nothing had happened. Moreover, both sides agreed that negotiations should be conducted as long as there is at least a slim chance of a deal. Thus, the negotiations may well continue until the New year.

Given the fact that two months ago both sides repeatedly stated that some decision should be reached already, now, the negotiations can be postponed even to 2021. Meanwhile, the pound sterling came under heavy pressure due to the outbreak of a new strain of coronavirus in the UK. On Sunday, Boris Johnson announced the increased quarantine measures in some areas of London, and Health minister Matt Hancock said that "the new virus is already out of control." Thus, the British economy could be very badly affected in December 2020, as well as in early 2021 due to a new outbreak of the pandemic, due to a new quarantine, due to a new "lockdown".

Overall, the outlook for the pound story remains extremely dim. If an agreement is not reached by Michel Barnier and David frost, then in 2021 it will be difficult at all. And the current wave marking, which implies the construction of a downward trend section, fully corresponds to the news background, which implies a decline in the British dollar's quotes. In the coming days, you need to monitor developments with the new COVID virus.

General conclusions and recommendations:

The Pound-Dollar instrument has presumably begun building a new downward trend section. Thus, I currently recommend selling the GBP/USD instrument for each MACD downward signal with targets located around the 31st and 30th figures within the expected first wave of a new downward trend. A successful attempt to break the high of wave 5 in 5 will indicate the readiness of traders for new purchases of the pound.