Getting Ready To Breakout From Its Bullish Flag

Following our last week’s report on GBP/USD, the pair failed to break above its bullish flag, instead of retracing from the flag’s top-level. However, recent denial of bearish momentum allowed the pair to rebound back towards the top-level while still waiting for the missing catalyst for a breakout confirmation.

In terms of indicators, continuous trading above the 18EMA provides a stronger bullish stance. From the MACD, diminishing bearish momentum suggests the pair extend higher after successfully breaking out from its flag and resistance level 1.3000. Failure to break above the flag will suggest continuous trading within the area.

From the fundamental point of view, new support came after Brexit Party Leader Nigel Farage said that his party would not contest in the December 12 general election, while the latest report showed Brexit Party stepping down from 40 odd seats. Optimism towards UK PM Boris Johnson’s possibility of winning the majority vote to ratify his Brexit deal in the parliament kept the market’s confidence in place towards the pound sterling.

Although concerns linger on which party would win the election and be the ruling party, investors’ confidence towards the pound remains high as Brexit can finally happen after a 3-year struggle. Bank of England recently also highlighted economic risks caused by Brexit, and with the possibility for the main issue to be brought out of the market, the country’s economy could finally find some rebound.