Sterling Set To Target $1.4000 As US Government Shutdown Materializes

The GBP/USD is trading up 0.3 percent at around $1.3900 against the US Dollar after major political parties in the US were unable to reach the deal averting the US government shutdown last Friday. The GBP/USD opened with the gap on the upside earlier in Asia but managed to close the gap retreating lower and trades back on the upside.

The GBP/USD retreated from last week’s highs of $1.3940 on Friday to close just above $1.3850 seen as an important support level representing 61.8 percent Fibonacci retracement of the slide of GBP/USD after the Brexit vote toward $1.1950. A breaking of that $1.3850 resistance level means that the same level became a support line now.

The GBP/USD was driven lower last Friday by disappointing UK retail sales that fell 1.5 percent over the month and core retail sales are seen falling 1.6 percent over the month in December, the data from the Office for National Statistics showed. Both total retail sales and core retail sales doubled the expectations on the downside weighing on GBP/USD.

Technically the GBP/USD busted the resistance at $1.3850 representing 61.8 percent Fibonacci retracement line of post-Brexit slide lower with no barrier between the current spot and the round big figure of $1.4000.

The FXStreet confluence indicator that analyses multi-factor coincidence of different technical barriers points to $1.3950 as a near-term resistance on a daily chart with no big barrier for GBP/USD until round big figure of $1.4000.

FXStreet confluence indicator for GBP/USD

With technical hurdle for GBP/USD already broken at $1.3850, the oscillators are painting picture of a corrective move sideways with both Slow Stochastics and the Relative Strength Index moving within the Overbought territory. The momentum indicator is pointing upward on a daily chart indicating a rise in demand and further potential on the upside.

GBP/USD daily chart