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GBPUSD Analysis: Bullish Momentum Building as No-Deal Brexit Risks Recede

GBPUSD Analysis: Bullish Momentum Building as No-Deal Brexit Risks Recede

Justin McQueen, Strategist

GBP Price Analysis and Talking Points:

  • GBP Supported on Potential DUP Backing
  • Receding No-Deal Brexit Risks to Keep GBP Bullish

See our quarterly GBP forecast to learn what will drive prices throughout Q1.

GBP Shoots Higher Amid Reports of Potential DUP Backing

Overnight, GBPUSD saw a delayed reaction, rising from 1.3070 to 1.3127, amid UK press reports suggesting that the DUP party had privately agreed to support Theresa May’s Plan B Brexit, if it includes a clear time-limit to the Irish backstop. However, with EU’s Barnier recently stating that the EU would not provide a time-limit on the Irish backstop, the initial gains have been faded, with GBPUSD tripping back below 1.31.

Receding No-Deal Brexit Risks to Underpin GBP

Given the increasingly likelihood that Article 50 could be extended, no-deal Brexit risks have receded, with the view that an extension would possibly lead to a softer Brexit. Consequently, this prospect continues to keep the Pound supported, despite the ongoing stalemate in government regarding the passing of PM May’s Brexit plan. GBP bulls to find value on dips below 1.30.

GBPUSD PRICE CHART: Daily Time-Frame (Mar 2018 – Jan 2019)

Chart by IG

Resistance at 1.3170 has held for now, which represents the 38.2% Fibonacci retracement of the drop from 1.4377-1.2435. A breach above 1.13170 opens up a run towards 1.34. However, a fresh impetus in the form of an official announcement regarding the extension to Article 50 is needed.

GBP TRADING RESOURCES:

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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