GBP/USD Daily Forecast – Sterling Surges on Brexit Deal Optimism

The UK is making progress towards reaching a Brexit deal, causing a surge higher in the British pound against all of its major counterparts.
Jignesh Davda
GBP/USD

Sterling Jumps on Hopes of a Possible Deal

Investor sentiment towards Brexit reversed sharply on Thursday after news that the UK is progressing towards a deal.

Prime Minister Boris Johnson seems to have finally gotten a win after being dealt a series of defeats. Johnson managed to reach a comprise with Irish Prime Minister Leo Varadkar that aims to get past the impasse regarding the Irish backstop.

The so-called backstop has been the main obstacle in reaching a deal. In a joint statement, Johnson and Varadkar announced that they could see a “pathway to a potential deal”, signaling that they have found a way around the issue.

Negotiators met for breakfast earlier today to discuss the revised proposal and things can potentially move fast from this point. GBP/USD is likely to remain volatile over the near-term as investors gain clarity on how Brexit will potentially unfold.

Technical Analysis

Investors have considered the potential of a no-deal Brexit long before Johnson was elected and have been pricing it in the potential of such a scenario. For that reason, the British pound stands to recover higher on further confirmation that the UK will leave the EU in an orderly fashion by the October 31 deadline.

GBPUSD 4-Hour Chart

We could see GBP/USD pare some gains in the absence of further developments although the pair has made a significant technical break. Specifically, the exchange rate has scaled above the 20-week and 100-day moving averages. These moving averages had held the pair lower in September to trigger a roughly 3% correction.

Further, the correction from September highs took the form of a bullish flag and yesterday’s bullish break also signals more upside.

The next level of interest to the upside falls at 1.2575. This level acted as both support and resistance during the summer. Beyond that, I think this rally could even extend further towards the 1.2700 area.

Bottom Line

  • Sterling is rallying as the markets see the odds of a no-deal Brexit declining significantly.
  • Upward momentum is strong and a catalyst is in place for a move to resistance at 1.2575. Beyond that, I see potentially for the rally to extend to 1.2700.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US