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GBP/USD: Cable Pushes Above 1.2600 Ahead of UK Inflation, BoE

GBP/USD: Cable Pushes Above 1.2600 Ahead of UK Inflation, BoE

2018-12-17 19:02:00
James Stanley, Currency Strategist
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GBP/USD Talking Points:

- The British Pound is continuing to bounce after setting a higher-low late last week, and that followed the early-week bearish breakout on the back of PM Theresa May’s postponement of the Brexit vote in UK Parliament. That was followed by a no-confidence vote in PM May, which she passed, and that helped to bring in a resistance check at prior support at 1.2671.

- This morning saw PM May announce that the Brexit vote will take place the week of January 14th, and it doesn’t look as though Europe is willing to re-negotiate, meaning PM May will have to push through the same Brexit plan that seemed destined for failure just last week. Also of interest around the UK and the British Pound is the Wednesday release of November inflation numbers followed by the Bank of England rate decision on Thursday morning.

- DailyFX Forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

The month of December started in a difficult fashion for the British Pound as Brexit worries took over. The pair came into the month in the midst of a three-week sell-off that saw the pair drop by almost 500 pips. In the opening days of December, the support level at 1.2671 came into play, and this helped to hold the lows for about a week; but as Theresa May called off the Brexit vote in UK parliament, the pair plummeted through support and ran all the way down to the 1.2500 figure.

GBP/USD Eight-Hour Price Chart

gbpusd gbp/usd eight hour price chart

Chart prepared by James Stanley

Following the postponement of the Brexit vote, PM May faced a no-confidence vote last week, which she passed, and this helped the pair to recover up to the 1.2671 level, at which point sellers came-in to show resistance; and that led to another push lower that fell short of that 1.2500 level, leaving market participants with a higher-low on the chart. That recovery bounce has held into this week and prices in the pair are back-above 1.2600 after news began to circulate that PM May has re-scheduled the Brexit vote in UK parliament for the week of January 14th.

GBP/USD Two-Hour Price Chart

gbpusd gbp/usd two hour price chart

Chart prepared by James Stanley

UK Economic Calendar for This Week

This final full week of 2018 brings a couple of items into the mix on the economic calendar that aren’t directly related to the ongoing discussions around Brexit, and that’s the Wednesday release of UK inflation figures followed by the Bank of England rate decision scheduled for the morning after. Also pertinent to GBP/USD and perhaps carrying more potential for volatility in the pair than the BoE rate decision is the FOMC meeting scheduled for Wednesday afternoon. The Fed taking on a more dovish tone could bring weakness into the US Dollar, which could provide a stronger topside push into GBP/USD.

The big question around GBP/USD is how high the pair might rise, and whether prices might test above that key area on the chart at 1.2671, which is the 23.6% Fibonacci retracement of the ‘Brexit move’ in the pair. In the Wednesday article on the pair, I had pointed out an additional area of resistance potential around the 1.2750 handle, which can keep the door open for stops around the 1.2850 marker. If prices do pose a topside break above 1.2850, the 1.3000 level would be back in-play, and this would signal a fairly-clear shift in the pair’s near-term dynamics that would make short-side strategies less attractive.

GBP/USD Four-Hour Price Chart

gbpusd gbp/usd four hour price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q4 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

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If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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

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