- The GBP/USD is flirting with levels last seen in 2016, before the EU Referendum.
- The pair may not run too fast as the next resistance levels may be old, but they are close.
GBP/USD Current Situation
The GBP/USD is trading around $1.4330, very close to the January 25th highs of $1.4345. Beyond this level, we are back to levels last seen before the EU Referendum of June 23rd, 2016, a day of historical significance that sent cable tumbling down from a swing high of $1.5000 to the low 1.30s.
This is how it looked back then:
-636594888401749574.png)
The current recovery is based on the weakness of the US Dollar across the board and also some hope about the British economy. Productivity is finally rising after a decade in the doldrums, the Bank of England is set to raise rates, and even wages are on the march to the upside. The hopes that pay is accelerating will be put to the test with the jobs report on Tuesday. See: UK wage growth Preview: Wages set to turn positive in real turn after more than a year.
Also, there is hope that Brexit negotiations on trade will yield a favorable outcome for markets: the closest possible relationship and regulatory alignment between the EU and the UK after Brexit.
Here is how the recent rise looks on the chart:
-636594887027523731.png)
GBP/USD higher levels
Looking up, the next interesting line is quite close: On June 17th, 2016, the weekend before the Brexit Referendum, the GBP/USD closed at $1.4390. This is not too far from the January 25th, 2018 high and serves as immediate resistance.
The next level to watch is $1.4435. This is the level the pair opened at on June 20th, when hope for a Remain vote was beginning to being priced in. It is not too far from current levels.
Further above, we find the round number of $1.4500, which is of psychological importance.
Further above, $1.4620 served as a stepping stone on the way up just before the critical vote, $1.4800 capped the pair on the eve of the referendum, and $1.5000 is a very round number that was touched when exit polls showed that Remain was on the verge of winning and before the actual results were counted.
At the time of writing, a break out seems to be a matter of time. One hesitation from the Fed about raising rates or a rise in UK wages (even only as expected) could send the pair higher. However, if this does not materialize, the GBP/USD will have marked a double-top.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.