Mario Blascak, PhD
Independent Analyst
- The flow of Brexit headlines slowed down after the UK Prime Minister said she will bring the Brexit agreement to parli\ament for a vote before January 21.
- The correction on GBP/USD was capped by 1.2700 on the upside with Brexit deal uncertainty persistently weighing.
- The UK inflation decelerated to 2.3% y/y in November with core inflation at 1.8% y/y.
- The US Federal Reserve is expected to hike rates to 2.25%-2.50% while delivering dovish outlook on rates going into 2019.
The GBP/USD is trading little changed on the upside at around 1.2650 after being rejected at 1.2660-1.2700 region representing the confluence of the downward sloping trendline resistance and the 23.6% Fibonacci retracement line on a daily chart. The news of the UK headline inflation decelerating in November to 2.3% y/y had no effect on the currency market with Sterling benefitting from the softer US Dollar as global growth outlook dims ahead of the expected rate hike by the Federal Reserve.
The GBP/USD was not able to withstand the levels above 1.2660-1.2700 earlier this week even with the outlook for the US rate hike being increasingly dovish with the rebound in Sterling ahead of the Federal Reserve largely a factor of dovish market expectations from the monetary policy outlook from Fed.
With the end of the year approaching, markets are nervous as global growth picture amid trade wars deteriorates. The Brexit uncertainty and fear of the UK parliament possibly rejecting the deal leaving the UK with no-deal Brexit that is the biggest drag on currency.
Technically, the GBP/USD is trapped in a downward sloping trend after breaking the important support line of 1.2660 representing a post-Brexit correction of Sterling higher to 1.4777 high. The technical oscillators like Momentum and the Relative Strength Index are both pointing sideways in the neutral territory while Slow Stochastics just made a bearish turnover below the overbought territory on a 1-hour chart. With no fundamental news until Wednesday, the sentiment is expected to drive the GBP/USD in a broad range of 1.2550-1.2660.
GBP/USD 1-hour chart
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.