Sterling (GBP) and Brexit Talking Points:
- GBPUSD pushing back to 1.3200 on Sterling strength and US dollar weakness.
- Negative Brexit talk is seemingly being dismissed by the market.
- Strong UK retail sales adds to Sterling’s allure.
The DailyFX Q3 GBP Forecast is available to download.
Sterling Pushing Back to a Two-Month High
The British Pound has recouped Wednesday’s losses and has turned positive on the session despite negative Brexit talk coming out of the informal EU Summit in Salzburg. While EU leaders have broadly welcomed UK PM Theresa May’s proposals, they continue to dig their heels in over the Irish border problem and have asked the UK to come up with another proposal. Both sides realise the negative economic consequences of a no-deal outcome, so it seems the market is pricing in a coming together of both parties to make a deal happen.
The latest batch of UK economic data will have pleased Sterling bulls with August retail sales beating expectations - July’s figures were also upgraded – painting a slightly more positive picture of the UK high street.
Recent Sterling (GBP) articles:
GBPUSD Soars as UK Inflation Jumps Higher, Brexit Talks Continue
GBPUSD Weekly Technical Outlook: Trend Support Needs Respecting
GBP: Sterling Continues to Benefit From a Lack of Bad News
GBPUSD Four Hour Chart Shows Broken Support Regained
We have been following trend support in the GBPUSD four-hour chart, arguing that it needs to be respected before the pair push back towards the July 9 high at 1.33346. The pair broke below support on Wednesday, but remained above the 20-day moving average, but have now broken back above the trend line. This trend needs to be respected and the July 26 high at 1.32135 broken convincingly to see the pair move higher.
GBPUSD Four-Hour Price Chart (January – September 20, 2018)
GBPUSD is also benefitting from a weak US dollar which is struggling to respect support between 93.85 and 94.00. The US dollar basket (DXY) currently changes hands at 94.00 and looks to have completed a head and shoulders pattern which would suggest that the market would lower.
US Dollar Basket Daily Price Chart (December 2017 – September 20, 2018)
What’s your opinion on Sterling and the current state of Brexit negotiations? Share your thoughts and ideas with us using the comments section at the end of the article or you can contact me on Twitter @nickcawley1 or via email at nicholas.cawley@ig.com.
Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.
--- Written by Nick Cawley, Analyst
To contact Nick, email him at nicholas.cawley@ig.com
Follow Nick on Twitter @nickcawley1
