For the sixth day in a row, the GBP/USD price continues to jump with gains reaching the 1.2877resistance level, the highest level in five months, before settling around 1.2826 in early trading on Thursday, amid optimism that a chaotic Brexit could be avoided. Traders are now wondering where will the gains stop, and when to sell?
The answer; all technical indicators have reached overbought areas, and it is normal for profit correction to take place at any time. It may consider adopting this if the pair moves towards 1.3000 psychological resistance. From a fundamental perspective, the future Brexit developments will determine the pair’s fate. Despite optimism and rosy statements, we did not see the terms of an agreement between Boris Johnson and the EU.
The pair also benefited from the pressure on the US dollar with the release of disappointing figures for US retail sales. Retail sales fell by -0.3% last month, according to the US Department of Commerce data, and markets were expecting a 0.3% increase. Core retail sales, which exclude auto sales, fell 0.1% last month and economists had expected an increase of 0.2%. This is in addition to the pessimistic expectations of the Federal Reserve, according to the report of the Beige Book, which said that the US economy grew at a slight to modest pace last month.
The Fed has already cut interest rates twice this year in an effort to protect the economy from the global recession, which it fears could eventually plunge the US into recession, but the Fed continued to cut rates to maintain the longest period of economic growth in US history.
According to the technical analysis of the pair: The general trend of the pair GBP / USD turned bullish after its recent strong and consecutive gains, this trend will strengthen by testing the 1.3000 psychological resistance. Any negative development of the Brexit path could push the pair down quickly with strong selling that could push it to the support levels at 1.2735, 1.2660 and 1.2540 respectively. Consideration should be given to growing confidence in the pound until the Brexit deal is reached and approved by the parliaments of the two sides.
As for the economic calendar data: From the UK; retail sales data will be announced. From the U.S, The Philadelphia industrial index, building permits, housing starts, industrial production, unemployed claims and oil inventory data will be announced.
