In the last few minutes, the GBPUSD has soared beyond the 1.2750 level on reports of a draft Brexit deal having been reached. Details are still being sought at the moment, but recall that EU Chief Brexit Negotiator Barnier had declared that a legal text of a deal had to be ready by today for him to be able to address the EU Summit about it.
The EU Summit is due to begin later this week and news of a draft deal would certainly lift the chances of an orderly Brexit. Already, a Reuters poll released earlier today had cut the chances of a no-deal Brexit from 35% to 30%. The September version of the same poll had the figures at 35%.
The majority of economists who were polled by Reuters are also foreseeing an EU-UK free trade agreement as a logical Brexit outcome. Majority of the economists are also of the opinion that an extension beyond the October 31 Brexit deadline would happen.
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Outlook for GBPUSD
GBPUSD is now approaching the 1.2790 mark, which brings the pair very close to the 61.8% Fibonacci extension at 1.2843 (trace from swing high of March 13 to swing low of September 3). A break above this level would push the pair to highs not seen since May 16 and would target 1.2954; the price lows of July 19 2018 and March 11 2019. These lows represent former support levels now acting as resistance in role reversal). Above these levels, 1.3080 (78.6% Fibonacci retracement) comes into focus.
On the flip side, if price is halted at the 61.8% retracement level, the door opens for a retest of 1.2662 (May 27 and June 27 lows). The situation remains fluid and price evolution will be directed by further Brexit headlines.