GBP/USD Forecast: Brexit stays in the way of an extended rebound

GBP/USD has lost its bullish momentum near 1.3500 on Thursday but continues to trade above the ascending trend line coming from November 12. Although the technical outlook suggests that the pair could continue to push higher, buyers could remain hesitant while waiting for fresh Brexit developments.

The data published by the UK's Office for National Statistics revealed on Friday that Retail Sales rose by 0.8% on a monthly basis in October. This reading came in better than the market expectation of 0.5% and helped the British pound gather strength in the early European session. Additionally, September's print got revised higher to 0% from -0.2%.

There won't be any high-impact data releases featured in the US economic docket ahead of the weekend and market participants will keep a close eye on news surrounding Brexit negotiations that are set to continue in Brussels on Friday.

Ireland's foreign minister Simon Coveney said on Thursday that the UK's unwillingness to compromise on the Northern Ireland (NI) protocol following the EU's revised proposal was "deeply disappointing."

Earlier in the week, European Commission Vice-President Maros Sefcovic said that he was "absolutely convinced" that they could break the impasses over the NI protocol. 

Heightened expectations for a Bank of England rate hike in December and this week's stronger-than-expected data releases point to further pound strength in the near term but bulls will look for positive Brexit developments before adding to their long positions.

GBP/USD Technical Analysis

On the four-hour chart, the Relative Strength Index (RSI) indicator stays below 70, suggesting that the pair could edge higher before turning technically overbought. As mentioned above, the ascending trend line stays intact, confirming the near-term bullish bias. 

On the upside, 1.3550 (100-period SMA) aligns as the next target before the pair can reach 1.3570 (static level).

Supports are located at 13500 (Fibonacci 61.8% retracement, psychological level), 1.3470 (Fibonacci 50% retracement, 50-period SMA) and 1.3440 (Fibonacci 38.2% retracement).