Earlier today, various officials have stated that the UK and the European Union are closing in a Brexit deal and even that a draft treaty could be published as early as Wednesday. However, later in the day, other officials tried to throw cold water on the euphoria that took over the markets by warning that even if negotiators do reach an agreement, Brexit will need to be delayed passed the “official” deadline of October 31st. But the timing of Brexit isn’t the story. The story is that negotiators are making progress and based on current statements from major players, progress is being made and a Brexit deal is in the works.
If it truly is the case, Sterling should continue to move higher, with GBP/USD already up almost 1.5% on the day. On a long-term time-frame (weekly), the pair closed above the downward sloping trendline from early in 2018 and the 50% Fibonacci retracement level from the high of the week of March 11th to the low of the week of September 2nd. However, the pair is about to run into a large confluence of resistance just above:
1) Horizontal resistance at 1.2865 from the weekly low in April
2) The 61.8% Fibonacci retracement from the high of the week of March 11th to the low of the week of September 2nd at 1.2837
3) The 38.2% Fibonacci retracement from the high of the week of April 16th to the low of the week of September 2nd at 1.2880.
Source: Tradingview, City Index
If price breaks through 1.2900, above is horizontal resistance and the psychological resistance level of 1.3000. However, if GBP/USD breaks through 1.3000, there is only minor resistance on the way up to 1.3400!
Tomorrow the UK releases a host of inflation data. However, they should all be a side show to any ongoing Brexit negotiations and headlines.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.