GBP Price Forecast: Pound Undeterred by Brexit Deal
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POUND STERLING ANALYSIS & TALKING POINTS
- Positivity around Brexit deal doing little for sterling.
- BoE and Fed speakers under the spotlight today.
- GBP/USD preparing for breakout from key technical levels – falling wedge still in focus.
GBPUSD FUNDAMENTAL BACKDROP
The British pound is trading lower against the US dollar this Thursday as the greenback finds some support. Last night’s Fed officials (Kashkari and Bostic) maintained a hawkish slant to their guidance reiterating the need to fight inflationary pressures and highlighting a tight labor market alongside a robust US economy that is able to withstand an aggressive monetary policy.
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From a UK perspective, the Brexit deal made by Prime Minister and the EU. Trade disputes with Northern Ireland have now been resolved but the most surprising aspect of this deal came from the accommodating reception from some senior pro-Brexit individuals who praised the new concessions. Although this is a positive for the UK economy as a whole, the currency remains dictated by central bank policy. The Brexit deal could bring some short-term relief for the pound against the USD but the more relevant data will stem from the US economy and the Federal Reserve. Recently Bank of England (BoE) Governor Andrew Bailey expressed ambiguous views to allow for flexibility in the coming months without spooking the markets. Later today, both central banks will see statements by their respective speakers (see economic calendar below) while jobless claims data will provide an update on the strong labor market in the US.
Source: DailyFX Economic Calendar
Introduction to Technical Analysis
Recommended by Warren Venketas
GBP/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Daily GBP/USD price action extends its path within the developing falling wedge chart pattern (black) despite the best efforts of bulls to close atop wedge resistance. Cable is now back below the 1.2000 psychological handle now looking to test the 200-day SMA (blue). An upside break could be seen via weak US economic data that could detract from the hawkish monetary policy stance which remains to be seen.
Key resistance levels:
- Wedge resistance
Key support levels:
- 200-day SMA
- Wedge support
BEARISH IG CLIENT SENTIMENT
IG Client Sentiment Data (IGCS) shows retail traders are currently LONG on GBP/USD, with 59% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment resulting in a short-term downside disposition.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.