The GBPUSD pair is rising for the fourth straight day as the market remain hopeful of a Brexit deal between the UK and the European Union. The falling number of new Covid-19 patients has also helped push the sterling higher.
Teams led by David Croft and Michel Barnier will congregate in Brussels starting today as they attempt to hammer an amicable divorce deal. With time running out, this will be the most important of these deliberations.
As such, the GBPUSD is rising as investors remain optimistic that the two sides will make some progress this week. According to Bloomberg, if they do make some progress, they will now hold a two-week marathon of talks as they polish the agreement. If they don’t, it will increase the possibility that the UK will crash out without a deal.
The impacts of Brexit have started happening. On Friday last week, JP Morgan, the biggest US bank and one of the main players in London said that it would shift more than £200 billion of its assets to Frankfurt, Germany. Some other businesses like Airbus have threatened to leave the UK if there is no agreement.
The GBPUSD is also reacting to the Covid-19 situation in the UK. Recent numbers show that more people are being infected, which has pushed the government to put some restrictions. However, on a positive side, the number of new cases has fallen in the past two consecutive days.
Looking ahead, the GBP/USD will also react to important economic data from the UK. Analysts expect that the data will show that mortgage approvals increased by 73k in August while lending rose to more than £3 billion. Also, they see the BOE consumer credit rising to more than $1.5 billion.
GBPUSD technical outlook
The daily chart below shows several things. First, the GBPUSD pair formed a shooting star pattern on September 1. The pair also formed a bearish flag pattern between September 11 and September 18. And in the past four days, the pair has been attempting to recover after it formed a doji pattern on September 23. This pattern happened when the pair moved at the 38.2% Fibonacci retracement level.
Meanwhile, the price is attempting to move above the 50-day and 25-day exponential moving averages. Therefore, I suspect that the GBP/USD will resume the downward trend as bears focus for the 50% retracement level at 1.2446.
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GBP/USD technical chart
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