Never miss a story from Martin Essex

Subscribe to recieve updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from Daily FX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Martin Essex

You can manage you subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Talking Points

- For traders in GBP/USD, the key question is whether the pair’s bounce over the last few days is the start of a new trend higher or a pause in its slide lower.

- For now, the advance looks corrective but further gains would question that conclusion.

What Does the Fourth Quarter Hold for the Pound, Equities, Oil and Other Key Markets? Find out here

The bounce in GBP/USD after its fall from a high of 1.3660 on September 20 to a low of 1.3027 on October 6 has been impressive. Since that low was reached last Friday it has climbed back to almost 1.32, helped most recently by an encouraging raft of economic data.

The rally has taken place despite a constant stream of negative political and Brexit-related headlines. The UK’s ruling Conservative Party is as divided as ever on how to approach Brexit, there’s been a failed leadership challenge to Prime Minister Theresa May, her ministers continue to jostle for position in case another challenge is more successful, she is said to be considering a Cabinet reshuffle and talk has re-emerged about no deal being better than a bad deal.

Even given the relative strength of the data and the continuing prospect of an interest rate increase this year by the Bank of England, the Pound’s climb has been striking.

Chart: GBP/USD One-Hour Timeframe (October 2 – 10, 2017)

Brexit Briefing: GBP/USD Is Not Out Of The Woods Just Yet

Chart by IG

However, to date, it has only recovered just over a quarter of the ground lost earlier.

Chart: GBP/USD Daily Timeframe (July 12 – October 10, 2017)

Brexit Briefing: GBP/USD Is Not Out Of The Woods Just Yet

Chart by IG

The question remains unanswered, therefore, as to whether the latest price action represents a new trend higher or just a correction in a continuing downtrend. As I wrote here, it’s arguable that all the bad news has now been priced in and that GBP/USD is due for a longer rally. However, on balance, this week’s advance still looks like just a correction and, as I wrote in my weekly forecast, further weakness seems probable unless we see several more days of gains.

Markets

Brexit Briefing: GBP/USD Is Not Out Of The Woods Just Yet

Upcoming UK/EU Event Risk (October 11, 2017, Times GMT)

Brexit Briefing: GBP/USD Is Not Out Of The Woods Just YetBrexit Briefing: GBP/USD Is Not Out Of The Woods Just Yet

--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

Follow Martin on Twitter @MartinSEssex

For help to trade profitably, check out the IG Client Sentiment data