GBP/USD analysis: at its highest since Brexit referendum and counting

Valeria Bednarik FXStreet

GBP/USD Current price: 1.3728

Spain and the Netherlands denied they softened their position on Brexit.
The UK to release inflation figures next Tuesday, key for current Pound's momentum.

Sterling seized dollar's weakness to reach its highest level since June 2016, when the Brexit referendum sent the GBP/USD pair down over 1,000 pips to never return, until now. The pair added roughly 200 pips on Friday to close the day at 1.3728, backed by news, later denied, that Spain and the Netherlands have softened their position on Brexit. However, ministers of both countries stated later on the day that nothing new has been discussed and that they support EU's Brexit negotiation Barnier. Nevertheless, the pair held on to gains triggered by the wrong headline, amid prevalent dollar's weakness. This Tuesday, the UK will release its December inflation data, including CPI, PPI, and the Retail Price index. Inflation is expected to have continued rising, at 3.2% YoY from previous 3.1%. If that's the case, the BOE may be forced to act and move rates, which will only result in further Pound's demand. In the daily chart, technical readings support additional gains ahead, as the price bounced sharply from a now bullish 20 DMA, while technical indicators turned north almost vertically, now near overbought levels. In the 4 hours chart, technical indicators have partially lost their upward strength within overbought territory, but are far from suggesting a downward movement. Below 1.3690, a correction is possible, but buying interest should re-surge around 1.3655, 2017 high.

Support levels: 1.3690 1.3655 1.3610

Resistance levels: 1.3745 1.3785 1.3820

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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