GBP/USD Price Forecast – British Pound Trades Range Bound on Renewed Brexit Hopes

The GBPUSD pair yesterday saw sharp two-way price action on news-driven momentum. The saw a sharp drop below mid-1.28 handle immediately after Bank of England’s monetary policy update. BOE kept interest rates unchanged but downgraded its forecast for economic growth for the year ahead from 1.7% to 1.2%  to GDP and this served as a trigger for the decline. However, the pair soon recovered from the loss and shot up all the way till 1.2996 where strong resistance from 1.30 handle prevented further gains. The upside move was inspired by hopes for soft Brexit deal following German Chancellor Angela Merkel’s comments that she believes Irish border issue can be resolved even without reopening the withdrawal agreement on Britain’s departure.

News Driven Momentum Capped At 1.30 Handle

Hopes for soft deal Brexit albeit lacking clear fundamental support has helped GBP stay strong near previous session highs. Investors now await headlines on PM May’s visit to Dublin for negotiations with her Irish Counterpart Leo Varadkar in regards to an alternative for Irish backstop agreement. Across the majority of Asian market hours, GBPUSD pair traded range bound near and above mid 1.29 handle. As of writing this article, GBPUSD pair is trading at 1.2942 down by 0.26% on the day. Range-bound action is expected to continue until further updates on PM May’s negotiation with Irish Counterparts hits the market. Headlines indicating at positive progress will help pair reclaim 1.30 handle and help GBP establish bullish price rally, while disappointing headlines will lead to the pair resuming recent downside price move.

Moving forward, investors await today’s macro data updates for short term profit opportunities. On the release front, UK calendar remains silent for the day, while U.S. calendar will see the release of WASDE report and U.S. Baker Huges oil rig count both of which are unlikely to have any lasting impact on the pair’s price action. When looking from a technical perspective, the pair is out of bear’s territory for a short time frame owing to previous session rebound. But the pair needs to scale above 1.30 handle to achieve bullish breakout while a fall below 1.2900 handle is required for bears to take control of the price action until which range bound action is likely to continue steadily.