GBPUSD rallied strongly during the European session in yesterday’s trading. The currency pair bottomed at 1.2461 and traded to an intraday high of 1.2591. Today, GBPUSD looks to extend its gains as it trades 0.17% above its opening price at 1.2563. This happened despite remarks from UK Prime Minister Johnson downplaying the risks of a no deal Brexit.
According to a report by Reuters, Johnson remarked that he is entertaining the scenario if an agreement with the EU cannot be reached. This follows after EU negotiator Michel Barnier said yesterday that the bloc wants a deal “but not at any price.”
Why was the pound unfazed? These remarks are not entirely new to market participants. However, as negotiations continue in the coming days, intensified talks could dictate the direction on GBPUSD especially because our forex calendar is blank for high-impact economic reports from both the UK and the US.
On the 4-hour time frame, it can be seen that GBPUSD has recently broken to the upside of its inverse head and shoulders pattern. As of this writing, the currency pair is trading above the neckline resistance around 1.2527. When you enroll in our free forex trading course, you will learn that a neckline break is often taken as a bullish signal. Should this happen, we could soon see GBPUSD rally to 1.2687 where it topped on June 16.
On the other hand, if buyers cannot sustain their momentum, the currency pair could retrace some of its gains. By drawing the Fibonacci retracement tool from the low of June 29 to the high of July 7, it can be seen that GBPUSD could test the confluence of support around 1.2465 where the currency pair could test the 38.2% Fib level. This price also coincides to the area where GBPUSD previously found support as well as the 100 SMA and 200 SMA.