GBPUSD is Up for 3 Straight Days; Can the Momentum Continue?
GBPUSD pair is up for the third straight day today. The pair is up by more than 0.36% and is trading at 1.2519, which is higher than this week’s low of 1.2257.
Brexit Hopes Boost British Pound
The GBPUSD is rising as investors remain optimistic about a Brexit deal as the fifth round of negotiations continue in Brussels. Analysts are banking on the fact that the EU and the UK are having these talks in person as a sign that progress will be made.
Still, the two sides have a lot of differences. For example, the UK has insisted that it wants to have total control of its fishing waters. The EU has rejected this because that is where most of their fishermen get their catch.
Also, the UK has insisted on a Canadian-style free trade agreement that provides free access to the bloc. The EU wants such an agreement but it insists that it wants to have a say on UK regulations. Another contentious issue is about the European court of justice.
Therefore, these are serious issues that the two sides will need to make progress on. And with these issues having serious political repercussions, there is a possibility that the members will find it difficult to reach an agreement.
Upbeat economic data
The GBPUSD is jumping because of the recent upbeat economic data. Yesterday, data from Markit showed that the manufacturing PMI rose to 50.1 from the previous 40.7. That was the first time in months that the manufacturing sector has expanded. Another data showed that the house price index declined by 1.4% in June. While this was worse than the expected decline of -0.7%, it was better than the previous month’s decline of 1.7%.
Further, investors are banking on a recently unveiled infrastructure program by Boris Johnson. They believe that it will help the country emerge from the crisi.
Risks for the GBPUSD
Still, there are several risks to remember. First, there is a possibility that the Brexit deal will not be reached. Second, there is a possibility that the number of coronavirus cases will continue rising as it is happening in the United States. Third, there is the risk of more bankruptcies. Just recently, property group, Intu shocked the market when it went bankrupt. Another risk for the GBPUSD is the American nonfarm payrolls numbers that will be released later today.
GBPUSD technical analysis
The GBPUSD pair is in its third day of gains. The pair is forming a three white soldiers pattern, which is usually bullish. Also, it has just moved above the 100-day exponential moving averages while the RSI has started moving upwards. Therefore, the pair is likely to continue moving higher as bulls target the next resistance level at 1.2600.
On the flip side, if the pair ends in the red today, it will invalidate the three white soldiers pattern, which will push the price lower. Therefore, the key level to watch is in the 50-day EMA at 1.2458.