GBP/USD Forecast: Sterling erases losses as a fresh wave of Brexit optimism hits the market

  • A fresh wave of Brexit optimism helped Sterling to recover from daily lows after Sterling fell below 1.3000 on news of Brussels is scaling back the recent Brexit optimism.
  • UK wages rose above expectations in support of Sterling with gains reversed after Brexit optimism was scaled back.
  • The GBP/USD is influenced strongly by Brexit headlines rather than the fundamental news.

The GBP/USD is trading flat around 1.3030 level after the European Union President Jean-Claude Juncker said the EU will do all to avoid hard border with Ireland with Checquers proposal to start close partnership via free trade agreement as a basis. 

The GBP/USD experienced a highly volatile session on Tuesday rising to 1.3088 after the UK wages rose above expectation by 2.9% y/y excluding bonuses just to fall all the way down to 1.2966 with the sources from the European Union scaling back the recent wave of Brexit optimism and warning the UK of “misinterpreting” the headlines concerning Brexit as many issues remain unresolved.

Even with the correction lower, the GBP/USD is still moving within the upward trending channel with the 55-period moving average on the hourly chart acting as an active support. The technical oscillators including the Relative Strength Index and Slow Stochastics look both exhausted on the downside and are now pointing higher.

The FXStreet technical confluences indicator shows that the GBP/USD is currently mired in a dense area of technical levels. Current level of GBP/USD around 1.3030 is just below the cluster of important technical levels including last week's high, the Simple Moving Average 50-15m, the SMA 10-one-hour, the Bolinger Band 15m-Middle, the Pivot Point one-week Resistance 1, the BB 4h-Upper, the SMA 10-15m, the SMA 5-15m, the 4h-high, the BB 15m-Upper, and last month's high.

Overcoming this zone opens the way for GBP/USD to test 1.3100 before surging all the way to 1.3163 which is the meeting point of the Pivot Point one-day Resistance 2 and the PP one-week Resistance 2.

On the downside, significant support is at 1.2972 which is the confluence of the Fibonacci 23.6%.

GBP/USD 1-hour chart

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