GBP/USD extends rally to 61.8% Fibo and overbought territory
- GBP/USD has been extending its ascent towards the 1.30 handle chalking up a high, so far of 1.2964 from a low of 1.2832.
- The market is backing the soft Brexit narrative over a pessimistic alternative hard Brexit while PM May holds on to her leadership and moves to Plan B.
GBP/USD is currently trading in the 1.2950s and bulls stay in control in a technical trade which is quickly leading the bulls into overbought territory on the short term time frames as the price reaches towards the 61.8% fibo retracement of the late Sep decline.
GBP/USD is taking its cues from both a rather ambiguous fundamental standpoint and a techncial position on the charts with momentum in its wings. First of all, the initial rally following a monstrous defeat for PM May's Brexit plan was unexpected. The analyses that have been bound about justifies that demand for sterling under the soft Brexit hat whereby the worst case scenario for the pound, a hard Brexit, has been shelved no sooner than PM May's leadership had been put into question. Nevertheless, the pound stayed bid and consolidated into the no-confidence vote.
The pound came under further demand following when Theresa May's government survived the no-confidence motion yesterday. The vote was in favour of the government of 325-306 as expected. Since then, May has reached out to party leaders in the Commons to meet to discuss Brexit options which again has been taken as a positive for sterling under the soft Brexit narrative.
Brexit Plan B progress
We have heard that meetings with lawmakers on finding a way forward on Brexit have been constructive and that there have been opposition labour lawmakers involved in discussions with the government. However, Labour opposition leader Jeremy Corbyn refused an invite by May to join forces and find a common ground unless May takes a No-Deal Brexit off the table, which so far, she said she will not, nor will she delay Brexit by pushing back Article 50; And for that matter, nor has she received any formal concessions from the EU, although there has been some noise around the possibility of the EU being open to negotiating.
The latest headline was from Reuters:
"The European Union is open to the possibility of an agreement with Britain that goes beyond free trade, EU Brexit negotiator Michel Barnier said on Thursday.
“If they (Britain) tell us they want a more ambitious relationship, we are open,” Barnier told reporters during a visit to Lisbon."
Meanwhile, cable is up to the 61.8% fibo of the late Sep decline, (1.2964), which may prove to be a tough nut to crack at this juncture according to the ATR, RSI on the shorter time frames that are heading or are already in overbought territory and indeed the confluence with R3 located 20 pips high at 1.2987. However, on a breach, cable can look to the 200-D SMA at 1.3097. On the downside, 1.2814/24 is a support area.