GBP/USD Forecast: Brexit jitters cap the bullish potential

Valeria Bednarik FXStreet

GBP/USD Current price: 1.2793

Better than expected UK Retail Sales and Markit PMIs helped GBP/USD reach 1.28.
The EU and the UK are “still too far away,” in negotiations, according to EU Barnier.
GBP/USD is bullish, June jut at 1.2812 comes as an immediate resistance level.

The GBP/USD pair surged on Friday to 1.2803, a fresh six-week high, amid the persistent dollar’s weakness and upbeat UK data. The kingdom published June Retail Sales at the end of the week, which jumped 13.9% in the month, much better than the 8.3% expected. Also, and according to preliminary estimates, the July Markit Manufacturing PMI rose to 53.6, while the Services Index improved to 56.6, both surpassing the market’s estimates.

However, and while other currencies hit multi-month highs against the dollar, GBP/USD added barely 60 pips on Friday, as the Sterling is at the mercy of Brexit-headlines. After the fifth round of talks failed last week, there are increased chances of a no-deal Brexit. EU chief negotiator Barnier said that a deal by the end of the year seems “unlikely,” adding that they are “still too far away.” UK negotiator David Frost agreed on the sharp differences but believes that a deal is still possible. The UK won’t publish macroeconomic data this Monday.

GBP/USD short-term technical outlook

From a technical point of view, the GBP/USD pair is still bullish. The daily chart shows that it’s holding above a flat 200 SMA, which broke this past week, while the 20 SMA advances below the larger ones. Technical indicators, in the meantime, are neutral-to-bullish within positive levels. In the 4-hour chart, a bullish 20 SMA continues to provide intraday support, currently at 1.2735, while technical indicators lost there bullish strength, but remain within positive levels, indicating limited selling interest. June monthly high at 1.2812 is the immediate resistance, with further gains expected on a break above it.

Support levels: 1.2780 1.2735 1.2690

Resistance levels: 1.2815 1.2850 1.2895

View Live Chart for the GBP/USD

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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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