GBP Jumps as Brexit Talks Move to Phase Two
- Juncker will recommend that talks move forward.
- GBP rallies as ‘no deal’ risk recedes and tensions begin to thaw.
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GBP/USD popped back above 1.35000 early Friday after the European Commission announced that ‘sufficient progress’ had been made on the first phase of Brexit talks to allow the process to move forward. In a joint statement with British PM Theresa May early Friday morning, Mr. Juncker said that while he was sad about the UK’s decision to leave the EU, “We must start looking to the future, a future in which the UK will remain a close friend and ally.”
With concessions likely to have been made on both sides of the table, talks can now move forward to the second phase including future trade agreements. UK PM May said that today’s decision would offer certainty to UK businesses, a much needed state after months of wrangling and rancour.
According to DailyFX analyst Michael Boutros, a breach above GBP/USD 1.35430 is needed to continue the broader uptrend.
Chart: GBPUSD One Hour Timeframe (November 27 – December 8, 2017)
IG Client Sentiment data show 46.2% of traders are net-long with the ratio of traders short to long at 1.16 to 1. In fact, traders have remained net-short since Nov 21 when GBPUSD traded near 1.32465; price has moved 1.9% higher since then. The number of traders net-long is 1.6% higher than yesterday and 21.4% higher from last week, while the number of traders net-short is 5.2% higher than yesterday and 12.3% lower from last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBPUSD trading bias.
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--- Written by Nick Cawley, Analyst
To contact Nick, email him at email@example.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.