GBP/USD Forecast: Sterling rejected at 23.6% Fibonacci level of 1.2660
|- The UK Prime Minister Theresa May said the parliamentary debate on Brexit deal will start in the first week of January with the vote in the following week starting January 14.
- The correction on GBP/USD was capped by 1.2660 on the upside with Brexit deal uncertainty persisting.
The GBP/USD is trading up 0.3% at around 1.2640 after being rejected at 1.2660 representing the confluence of the downward sloping trendline resistance and the 23.6% Fibonacci retracement line on a daily chart. The news of the UK Prime Minister Theresa May submitting the Brexit deal for a parliamentary vote during the first week of January had no effect on the currency market with Sterling benefitting from the softer US Dollar as global growth outlook dims ahead of the expected rate hike by the Federal Reserve.
The GBP/USD fell below the important support line of 1.2660 last week and made a new 2018 and a 20-month low of 1.2477. Current rebound in Sterling is a sign of market relief ahead of the Federal Reserve expectedly raising the Fed funds’ range by 25 basis point on Wednesday and markets looking for clues on monetary policy outlook from Fed.
With the end of the year approaching, markets are wobbly with global stocks selling off and the oil prices falling as growth picture worldwide deteriorates. In the case of the UK, the slowest growing economy of G7 countries, it is the Brexit uncertainty with the UK parliament possibly rejecting the deal leaving the UK with no-deal Brexit that is set to weigh on both the economy and the currency.
Technically, the GBP/USD is trapped in a downward sloping trend after breaking the important support line of 1.260 representing a post-Brexit correction of Sterling higher to 1.4777 high. The technical oscillators like Momentum and the Relative Strength Index are both pointing downwards in the neutral territory while Slow Stochastics just made a bearish turnover in the overbought territory on a 1-hour chart. With no fundamental news until Wednesday, the sentiment is expected to drive the GBP/USD in a broad range of 1.2550-1.2660.
GBP/USD 1-hour chart
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