GBP/USD Still Unable to Surpass Resistance Level
- Early election should be prime GBP driver in coming weeks
- UK construction output fell for sixth consecutive month
- Direction for GBP/USD remains bullish in short term
The GBP/USD pair is trading this Thursday around 1.2860 level, despite the fact that construction output in the UK fell for the sixth consecutive month. The pair was recently supported by the fact that the United Kingdom and the European Union reached an agreement on the UK’s departure from the Union.
Brexit influence still very strong
This currency pair is still unable to surpass the 1.3000 resistance level, but according to the technical analysis, the direction for GBP/USD remains bullish in the short term.
According to the latest news, UK Prime Minister Boris Johnson said this week that Government will not be extending the Brexit transition period beyond January 31. The influence of Brexit is still very strong, and any positive news about it would offer fresh support to the pound. The US economy is still doing well in terms of growth, but the Federal Reserve cut rates by 25bps as expected last week.
Technical analysis
In the last 30 days, this pair has been in the “bullish” phase, with the price advancing from 1.2200 to above 1.3000. The GBP/USD pair was not able to stay above the 1.3000 level and is currently trading around the 1.2860 level.
GBP/USD technical analysis
1.3000, 1.3100, and 1.3200 represent the current resistance levels, while 1.2800 and 1.2600 are current support levels. According to the technical analysis, the direction for GBP/USD remains bullish in the short term. If the price jumps above 1.3000, it would probably reach the 1.3300 level very soon. The next target could be located around 1.3050.
On the other side, if the price breaks the first strong support at 1.2800, we have an open way to the 1.2750 level. The market is currently testing several different things that could drive it lower, including the 61.8% Fibonacci retracement level which is below current pricing. If the price breaks the strong 1.2600 support level, that would be a major “sell” signal and an open way to the 1.2500 level.
Background noise and conclusion
Brexit uncertainty still affects the market negatively, and there are still doubts about its final outcome. Every bad news connected to Brexit will likely result in some demand for the US dollar, and this will have a negative influence on GBP/USD.
The US has moderate economic growth, and policymakers will probably not cut rates further anytime soon while the situation in the UK is connected to the outcome of an early election and Brexit. According to the fundamental and technical analysis, the major direction for this pair remains “bullish-neutral”, but as long the price is below 1.3000 we cannot have a clear picture.
The pair needs to fall below the 1.2800 support level to extend moves lower. And if the price breaks the strong support at 1.2600, that would indicate a “sell” signal.