GBP/USD Forecast: Brexit deal set to boost Sterling with the golden cross formed on the daily chart
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- The GBP/USD is trading flat at around 1.2950 ahead of the UK Cabinet meeting that is expected to approve the Brexit agreement text.
- The UK inflation data missed the market expectations on the downside with little effect of the currency market.
- The UK junior government coalition partner DUP leader A|rlene Foster said: "we have no choice but to reject this Brexit deal.”
- The GBP/USD currency pair closed the gap rising to 1.3050 before falling prey to uncertainty and pulled back. Sterling is expected to be boosted should the Brexit deal pass in the UK Cabinet.
The GBP/USD is trading flat at around 1.2950 ahead of the UK Cabinet meeting scheduled fro 14:00 GMT today with the clear agenda of approving the text of the Brexit agreement between the EU and the UK.
Both, UK headline and core inflation remained stagnant in October rising 2.4% y/y and 1.9% y/y respectively, missing the market estimate of a slight acceleration.
The major risk event for the day is the approval of the Brexit agreement text by the UK Cabinet that is set to meet at 14:00 GMT with the meeting lasting possibly for hours.
The junior government coalition party leader Arlene Foster already said that the DUP will have no other choice than to reject this Brexit deal and “this would be the end of our support for the UK PM May's Brexit process."
The currency market implications from current tensions are straightforward. While approving the Brexit deal is Sterling positive, the end of the Theresa May government in the final stage of the Brexit negotiations will have a detrimental effect on Sterling, confirming indications of the Bank of England Deputy Governor Ben Broadbent from this Monday.
The GBP/USD currency pair is building a base just below the downward sloping trend on a daily chart. The daily swings were massive over the course of last two days with daily up and down of 1% framed by 1.2827 on the downside and 1.3050 on the upside while the currency pair settled at mid 1.2900s. With Brexit deal about to be approved, the potencial for the upside mounts as the Momentum and the Relative Strength Index both flatlined while Slow Stochastics is set to make a bullish crossover on a daily chart. Moreover, the golden cross of a 50-day moving average crossing over a 100-day moving average to the upside was formed on a daily chart indicating final trend reversal targeting 1.3060 before moving to 1.3380 and 1.3460 important Fibonacci level. Failure of Brexit deal to materialize should see GBP/USD fall towards 1.2900 first before testing 1.2830 next.
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