GBP/USD Back Above 1.30: Barnier Calls Brexit Deal “Realistic”

17

Sometimes, it’s best to keep the analysis simple.

As the informal “deadline” for a Brexit deal draws nearer, sterling is becoming more attuned to headlines about the likelihood and structure of a deal. The UK’s relationship with its peers in the European Union is rapidly becoming the factor to watch when trading the pound, trumping central-bank actions and traditional economic data.

Therefore, it’s not surprising that GBP/USD has spiked following Monday’s headlines from chief EU Brexit negotiator Michel Barnier that an agreement is “realistic” in 6-8 weeks. A subsequent report from the Guardian that a Brexit summit was likely to be scheduled for mid-November added some meat to Barnier’s comments. While we’ve seen similar “false dawns” before, rhetoric and actions around a potential Brexit deal have taken on a distinctly positive tone – see GBP/USD Hits 3-Week Highs on Bullish Brexit Chatter) – raising the prospects of a GBP-positive deal in the coming weeks.

Technically speaking, GBP/USD has spiked above 1.30 on the headlines to peak above both its bearish trend line off the early May high and its 50-day moving average. A close near Monday’s highs will give bulls more confidence that the trend is indeed turning higher. In that case, the next level of resistance to watch will be the late-July highs and the 100-day moving average around 1.3200. Conversely, a failure to hold Monday’s breakout could lead a small dip, but the near-term rising trend line around 1.2900 should provide an intraday floor as long as Brexit rhetoric maintains its positive tone.

As a final note, while Brexit developments will remain (pun not intended) the primary factor driving trade in cable, there are a couple of economic developments to watch this week. Tuesday’s trade brings the monthly UK jobs report, with economists expecting +3.6k net new jobs and wages to rise at 2.5% year-over-year. Then, Thursday brings the BoE meeting, though having just raised its benchmark interest rate to 0.75% last month, little intrigue is likely.

GBP/USD Back Above 1.30: Barnier Calls Brexit Deal “Realistic”

Daily GBP/USD

Source: TradingView, FOREX.com

Cheers

LEAVE A REPLY

Please enter your comment!
Please enter your name here