GBP/USD Forecast: Brexit transition hints lending support, US macro data eyed

Haresh Menghani FXStreet

On Thursday, the British Pound was largely driven by fresh Brexit headlines, wherein the GBP/USD major initially tumbled to the 1.3120 area but quickly recovered to hit fresh one-week highs before running into some resistance ahead of the 1.3300 handle. The pair came under intense selling pressure after the EU's chief negotiator Michel Barnier, during a joint press conference following completion of the fifth round of talks with the UK, said that Brexit negotiations have reached a stalemate. The pair took a sharp turn for the better on reports that the EU may offer the UK a two-year transition period, but conditioned to the UK meeting financial obligations with the Union.

Today's European economic docket lacks any major market moving economic releases and hence, the focus would remain on the key US macro data - September retail sales and inflation figures, due later during early NA session. Following a sharp rise in the US wholesale prices (PPI), today's headline CPI print would be looked for confirmation that the inflation is indeed rising faster and revive hopes for gradual Fed monetary policy tightening cycle even beyond December meeting, which should eventually reignite short-term US Dollar rally.

The pair on Thursday rebounded from closer to 50-day SMA support and is now trading with positive bias for the fifth consecutive session, indicating possibilities of additional gains in case of any disappointment from today's US economic data.

Technically, the pair is now facing some resistance near the 1.3300 handle. Hence, a clear breakthrough the mentioned hurdle is likely to accelerate the up-move towards 1.3345-50 resistance, representing the 50% Fibonacci retracement level of the pair's recent fall. A strong follow through buying interest has the potential to continue lifting the pair towards the 1.3400 handle, nearing the 61.8% Fibonacci retracement level.

On the flip side, previous resistance, near the 1.3235 region, now becomes immediate support to defend, which if broken could accelerate the slide back towards the 1.3200 handle en-route to the 23.6% Fibonacci retracement level support near 1.3175 area.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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