Pound higher on Brexit news flow, watch for retrace

The pound found firm bid and pushed up above $1.30 to trade at its highest since November amid indications that a no-deal Brexit is becoming less likely. GBPUSD was last through the Nov 15th high around 1.3030 and this move north from 1.3040 may force the pair to the Nov 14th high at 1.3070. The 200-day moving average will offer resistance around 1.3080 before a breakout to 1.31 and potentially a run up to the October highs at 1.32. On the 5-minute chart we can see the divergence on the 14-period RSI with the price action that signals this rally could run out of steam fairly soon.

The latest is that Labour will support a move to prevent a no-deal exit. This raises the spectre of a delay to Brexit, which seems to have been taken as a reason to bid up the pound. EURGBP has shot lower too with the 87 level sight – breach could call for move back to the Nov lows around 0.8650.

As ever with Brexit news flow and the pound however, we would urge extreme caution with taking anything at face value. The situation remains very fluid, albeit the momentum seems to be with the pound at the moment.

As regards the process, the no deal outcome seems less likely but there are yet big hurdles for the Remainers to force a delay to Brexit, not least changing the legislation that has March 29th firmly entrenched as the leaving date. Nevertheless a delay might just be acceptable to a majority of the Commons in order to attempt to deliver a more palatable deal. This would then raise prospects of a General Election and/or a second referendum.