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GBP/USD Daily Price Forecast – British Pound Flat Ahead of US FOMC Update

By:
Colin First
Published: Sep 25, 2018, 06:32 UTC

Brexit uncertainty and caution ahead of the Fed could keep the pair range-bound today.

GBPUSD Tuesday

The GBPUSD pair rallied significantly during Monday’s trading session breaching some resistance levels and continued strength to Pound bulls could even help establish new bull run, however current market influenced by Brexit proceedings is just a headline away from turning the tide against British pound with investors placing bets solely dependent on Brexit headlines, investors are very cautious when placing bets as such a headline could result in serious losses in case of huge investments. Currently, the GBP/USD pair is trading at 1.3104 down by 0.10% on the day, having hit a high of 1.3124 in Asian market hours. The pair fell sharply on Friday after the UK PM Theresa May informed markets that Brexit negotiations have reached a standstill. However, the bears failed to penetrate 1.3055, establishing the price level as a strong support.

Pound Continues To Gain Support from News on Local Markets and Brexit Proceedings

Further, comments from UK’s Brexit Secretary Raab indicate the UK government is unlikely to bend easily to EU’s demand, meaning the uncertainty over EU-UK Brexit negotiations is here to stay for a long time. Upcoming negotiations will be all about the Irish border, with the UK trying to avoid Northern Ireland running a different regulatory regime compared to the UK. On the other hand, taking the UK including Northern Ireland out of the single market may suggest a hard border between the Republic and Northern Ireland. The softer Brexit is, the less relevant the border issue, GBP had been strong vs the USD on Monday and was outperforming all of the G10 currencies as it retraces a portion of last Friday’s impressive 1.5% Brexit-driven decline. Local media are reporting of a possible snap election in November and the Labor party is offering hints of support for a second referendum.

All eyes are on PM May’s leadership prospects heading into next week’s Conservative party conference. The latest CFTC speculative positioning data have revealed a reduction in both gross long and gross short positions while pushing the net to a fresh multi-year short. Risk reversals are pricing a sizable premium for protection against GBP weakness vs. both the USD and EUR. Meanwhile rising US T-yields is pressuring major currencies across global market giving US Greenback strength to recover losses incurred during North American market hours. The pair’s price action mirrored EURO with slight bounce and reversal shortly thereafter and the pair has since maintained a flat tone across Asian market hours. Expected support and resistance for the pair are at 1.3098, 1.3055, 1.3000 and 1.3146, 1.3205, 1.3299 respectively.

About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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