GBP/USD Forecast: Should Sterling stay 1.3085, the target of 1.3200-1.3240 is in place
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- The UK Cabinet was invited to study the Brexit agreement without the crucial part on the Irish border that is being negotiated in Brussels.
- After breaking above the resistance zone of 1.3085-1.3100 the GBP/USD now targets 1.3200 representing a 50% Fibonacci retracement of a post-Brexit rebound. from 1.1970 to 1.4377.
- The FOMC meeting later on Thursday is expected to pave the way for the December rate hike in the US. For more details read Joseph's Preview here.
- The golden cross of a 50-day and a 100-day moving average is about to materialize on a daily chart indicating further upside potential.
The GBP/USD is trading little changed at around 1.3140 on Thursday as the UK Cabinet was invited by the Prime Minister Theresa May to study the Brexit agreement that misses the crucial part on the Irish border. The GBP/USD has also been buoyed by weakness in the dollar following the Democrats snapping the victory in the House while Republicans retained the Senate majority after the US mid-term elections.
With the Irish border issue being negotiated in Brussels, chances are that the UK Prime Minister could visit Brussels as well to finalize the deal before approval at the European Council meeting. Such a scenario should be treated with caution as the parliamentary approval remains a potential risk.
The risk reversal indicates that traders are the least bearish on Sterling since June.
The major market event of Thursday is the November FOMC meeting that is expected to keep the monetary policy unchanged but indicate that the December rate hike is on the way after a remarkable October labor market report that saw wages rising by the highest growth rate in a decade and 250K new jobs added. The outlook for monetary tightening is expected to anchor the US Dollar.
The GBP/USD broke the 26.3% Fibonacci retracement level of 1.3085 on Tuesday and it was boosted further overnight after the US Mid-term elections saw Democrats taking over House while Republicans retained the Senate and the power division was weighing on the greenback. The Relative Strength Index is neutral on a 1-hour chart while Slow Stochastics made a bullish crossover in the overbought territory. The key area of resistance at 1.3085 was broken and the currency pair is now in the run for 1.3200 and 1.3240 next. Moreover, the move above 1.3100 is likely to generate a golden cross formation on a daily chart, the crossover of a 50-day moving average and a 100-day moving average, indicating a further move towards targeted levels.
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