GBP/USD Pound Holding Grounds

Following the previous report on GBP/USD, the 50EMA (red) was able to provide sufficient support for the pair to extend its rebound back above its 1.3000 level. After its rally back above 1.3200, the pair is still denied from its top levels as it currently finds grounds above the 18EMA (orange). Recent candlestick formation showed a lower high since the evening star formation, signaling the pair to consolidate in the near term as it continues to stay above the key 1.3000 level. 

In terms of MACD, the bearish momentum is showing weakness; however, it failed to form a bullish crossover, providing unclear speculation for its movement. Further confirmation is required, such as breakout below the key support 1.3000 or above the previous high at 1.3300, to obtain a clear path for the pair. The absence of such confirmation suggests the pair to consolidate between the regions.    

From the fundamental point of view, trade negotiations with the European Union (EU) remain the highlight after Brexit is delivered on January 31 as the withdrawal bill now goes through final Parliamentary stages before taking full effect. UK PM Boris Johnson is expected to use the threat of no-deal Brexit to gain the upper hand during negotiations with the EU. 

The biggest concerns are towards the possibility of both sides reaching a trade agreement before the end of the Brexit transition period on December 31 this year, after PM Johnson ruled out any form of extension. Further pressuring the pound is Bank of England (BoE) future interest rates, where the bank signaled possibilities for further rate cuts to sustain the country’s economic growth during the transition period. 

All in all, the market is still happy to be able to witness Brexit this January 31, after few years of impasse and political tensions.