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GBPUSD Price Outlook: Sterling Bulls Intrigued by Angela Merkel's Comments

GBPUSD Price Outlook: Sterling Bulls Intrigued by Angela Merkel's Comments

2019-08-22 08:00:00
Nick Cawley, Strategist
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Brexit News and GBPUSD Price, Chart and Analysis:

  • Chancellor Merkel says Irish backstop a ‘fallback position’.
  • Boris Johnson says Brexit talks can finally begin.

Q3 2019 GBP Currency Forecast andTop Trading Opportunities

Keep up to date with all key economic data and event releases via the DailyFX Economic Calendar

UK/German Brexit Meeting – A Ray of Hope?

The meeting between UK PM Boris Johnson and German Chancellor Angela Merkel on Wednesday produced some interesting comments which, if followed through on, could produce an answer to the current Brexit deadlock. Frau Merkel said at yesterday’s press conference that the Irish backstop was only a fallback position designed to come into effect if all other options failed. Merkel then said that a solution to the backstop impasse would probably be found in the next two years, ‘but we can also maybe find it in the next 30 days to come’. While this may be just a throwaway comment, it may also be a prompt to the UK that the EU may be responsive to fresh ideas in the coming weeks. A slightly more conciliatory tone from Germany ahead of PM Johnson’s trip to France today to see President Macron. Macron continues to take a hard line with the UK, and it will be interesting to see if he refuses to change his stance or if, like Merkel, he softens his approach.

GBPUSD is currently either side of 1.2130 and is waiting for news from Johnson’s meeting with Macron. Sterling bulls may take comfort from GBPUSD’s recent behaviour to Brexit news flow. On Tuesday this week, GBPUSD jumped around 100 pips almost immediately when news filtered out that Chancellor Merkel was looking forward to her meeting with Boris Johnson to discuss a practical Brexit backstop solution. It may be that Sterling short positions in the market are starting to get edgy and Tuesday’s sharp rally did suggest that near-term stop-loss positions were taken out quickly.

What is the Brexit Backstop and How Does it Impact the British Pound

The GBPUSD daily chart needs to break, and close, above 1.2170 in the short-term to allow the pair to build momentum to attempt 1.2250 and 1.2382. A break and close below 1.2100 and 1.2040 would suggest a re-test of the recently made two-and-a-half year low at 1.1983.

Sterling Price Weekly Forecast: Brexit News Flow and Political Manoeuvres

GBP/USD Price Chart (January – August 22, 2019)

GBPUSD Price Outlook: Sterling Bulls Intrigued by Angela Merkel's Comments

Retail traders are 76.1% net-long GBPUSD according to the latest IG Client Sentiment Data, a bearish contrarian indicator. However recent daily and weekly positional changes give us a stronger bearish contrarian bias even though traders remain net-long.

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.

What is your view on Sterling (GBPUSD) – bullish or bearish? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

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

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