GBP/USD: Brexit revival sparking bullish correction ahead of UK GDP figures

Sterling bidders remain in control heading into the London market session, fueled by Brexit hope.
A UK GDP reading is slated for the London morning, and contracting growth numbers bode poorly for buyers.

Joshua Gibson FXStreet

The GBP/USD is grinding its way higher for Wednesday, clearing 1.3150 in early trading as bullish-hopefuls continue to cling to headlines that suggest that Brexit may not turn into the flaming mess many investors are fearing.

News headlines continue to cross that all hope is not lost in the ongoing Brexit saga, and this week is seeing a revival in the bulls' camp as the UK and the European Union look set to try and strong-arm their way into an interim deal ahead of a fast-approaching November deadline, and risk-hungry investors are jumping on the GBP train in anticipation of some forward momentum on talks. The two sides remain far apart on the still-unresolved Irish border dispute, as well as how far and for how long the UK will remain embroiled in the European customs union following Brexit, and the Eurosceptic Brexiteers within UK Prime Minister Theresa May's own party still remain a viable threat, still promising to vote down any Chequers-based deal that PM May might squeeze out of the EU.

Wednesday also delivers a fresh round of the UK's monthly GDP reading at 08:30 GMT, with the headline figure forecast to clock in at 0.1%, a slight contraction from the previous month's 0.3%, and a missed reading here could see bulls having a harder fight than they anticipated as Britain's economy still struggles to throw off signs of stagnating growth within their domestic economy.

GBP/USD levels to watch

Despite obvious sell-side risks present for the Cable heading into the latter half of the week, the GBP/USD pairing remains well-bid for the early half of Wednesday, and as FXStreet's own Valeria Bednarik notes, "meanwhile, the 4 hours chart for the pair shows that it found support around a flat 200 EMA, now developing also above a bullish 20 SMA, while technical indicators bounced from their mid-lines, holding below previous monthly highs despite the price reached a fresh one. The pair is still developing below the 50% retracement of the 2016/18 rally at 1.3170, a major static resistance level that needs to be cleared for a more sustainable recovery ahead. Seems unlikely, however, that the pair could begin a clear directional move with a Brexit deal still pending."

Support levels: 1.3040 1.3000 1.2970

Resistance levels: 1.3100 1.3130 1.3175

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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