Market Overview

GBP/USD Forecast: Sterling Capped By 50-Day Moving Average Before The Parliamentary Debate

Share:
GBP/USD Forecast: Sterling Capped By 50-Day Moving Average Before The Parliamentary Debate
  • The GBP/USD is trading flat at around 1.2740 ahead of the UK parliament resuming Brexit deal debate later on Monday.
  • Briton would vote “remain” should the referendum on leaving the European Union be held now, a survey from the polling firm YouGov showed.
  • The UK government is set to hold a meaningful vote on Brexit deal on January 15.

The GBP/USD recovered from the lowest level in last 21 months reached after last week’s flash crash and it is trading flat at around 1.2740 before the UK parliament is resumes the Brexit deal debate. The BBC reported that the UK government will hold a Brexit deal vote on Tuesday, January 15.

The GBP/USD saw a volatile session last Friday with the currency pair trading around 1.2700 just to fall to 1.2610 after the US non-farm payroll report. Sterling pulled back up strongly after the US Federal Reserve chairman Jerome Powell remained dovish with the remarks in the economic forum discussion in Atlanta last Friday, sending the US Dollar lower across the board. 

The key economic report of last week saw the number of US jobs rising way above expectations by 312K in December, up from 179K expected by the market with wages up 3.2% over the year. The unemployment rate in the US ticked up to 3.9% in December with the participation rate rising, but the overall optimistic tone of the report prevailed sending US Dollar higher with Sterling testing 1.2610.

The US Federal Reserve Chairman Jerome Powell reversed the course of the US Dollar saying the Fed needs to be “patient” in watching incoming economic data and stands ready to adjust policy, as the Fed did in 2016 when financial markets tightened.

The Brexit deal debate is expected to return to the UK parliament with discussions set to prove a fierce opposition to Theresa May’s proposal with deal unlikely to be approved by parliament at the current state. Adding to jitters, the UK polling firm YouGov said 46% of Britons would vote “remain” and 39% would vote “leave” should the Brexit referendum happen again now.

Technically, the GBP/USD is trading in a downward sloping trend on a daily chart. The technical oscillators including Momentum and the Relative Strength index turned flat-to-higher with Sterling retreating from a fresh 21-month low and the Slow Stochastics made a bullish crossover within the neutral territory. After crashing to a 21-month low of 1.2438 last week, the GBP/USD is expected to re-test a 50-day moving average at 1.2777. Even with GBP/USD resuming sideways trend, a short-term recovery towards 1.2770 and above is not enough to reverse the trend. With Brexit deal uncertainty weighing on Sterling, a fundamental pressure is still in place to see GBP/USD falling further towards 1.2500-1.2440 level.

GBP/USD daily chart

gbpusd_daily_chart-636824508504029737.png

 

Related Articles

View Comments and Join the Discussion!

Posted-In: FXStreet GBP/USDEarnings News Eurozone Forex Global Markets