GBP/USD Daily Price Forecast – GBP/USD Consolidates Above 1.32 Handle as Risk Appetite Held Steady Across the Week

Limited data for Friday will see continued focus given to Brexit talks, which see cold water beginning to splash on hopes for a peaceable workaround.
Colin First

The GBP/USD heads into Friday’s London market open sitting just below recent swing highs, with Thursday’s peak of 1.3298 sitting close by. This week has seen resurgence in market risk appetite as traders shake off trade war fears and investor sentiment improved regarding Brexit, with hopes beginning to edge once again into higher territory that a workable solution will be reached. However headlines late in the day on Thursday continuing into the overnight session threw that confidence into question though, as the EU and the UK remain miles apart on several key points, mainly the lack of a solution on the Irish border problem, and the work-ability of a trade regime within the UK, and failure from the two sides to reach an agreement by the end of October will see the UK careening into a messy and disorderly Brexit.

Hard Exit Scenario Used As Bargaining Chip by Both Sides on Brexit Negotiations

On Thursday the EU warned UK Prime Minister Theresa May that if she doesn’t begin giving up more ground on trade or the Irish border issue, she runs the risk of Britain experiencing a hard crash on its way out the EU door. Meanwhile, PM May is promising Ireland that it will not see a ‘hard border’ with Britain, though PM May is also warning that she too is not afraid to see a hard exit from the EU, bringing the round-table discussions in Salzburg to a rough standstill as both sides throw around the concept of a hard-Brexit as more of a negotiating tactic than an outright threat. As of writing this article, the GBP/USD pair is trading flat at 1.3263 up 0.01% on the day, however given the consolidative price action above 1.325 handle it is highly likely for the pair to aim for 1.33 handle on any positive news regarding Brexit proceedings.

On the economic calendar little of note exists to carry the GBP through to the weekend, though 08:30 GMT will be seeing the UK’s Public Sector Net Borrowing for August, which is expected to remain relatively steady, forecast to come in at £2.85 billion (last £2.872 billion), while the USD side of the major pair will be seeing US Markit PMIs at 13:45 GMT, with the headline preliminary Composite CPI for September expected to tick up to 55.0 after last coming in at 54.8. The Sterling’s recent bullish move up has left the GBP/USD poised for further gains, yet moderately overextended, and a pullback could be in order before bulls manage to finish the run to 1.33. When looking from technical perspective, in the 4 hour chart, the pair seems to have lost upward strength and technical indicators are currently flat in overbought territory, without indicating a possible upcoming decline but rather suggesting a new leg higher for this Friday. Expected support and resistance for the pair are at 1.3225, 1.3170, 1.3130 and 1.3295, 1.3330, 1.3380 respectively.

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