GBP/USD: a weakening of bullish momentum, despite positive Brexit news

Yesterday, the positive news on the UK dominated, due to strong GDP growth and more clarity about Brexit given by Eu Brexit negotiator Michel Barnier (who is in charge of the EU's talks with the UK). Today the focus will be:

11:30 Britain's earnings index

11:30 UK Unemployment Claims

11:30 Unemployment in the UK

These data will tell us about the future policy of the BoE, following the renewal of Mark Carney's mandate. Mark Carney already raised rates once.

Technical picture: GBP/USD.

Daily chart

After yesterday's positive news, the pound surged above the downwards sloping channel. Currently GBP/USD is at the resistance of the Fibonacci 23.6% level around 1,306-1,307. A continuation of the upward momentum depends on a break out above 1.307. The bullish impulse, however, is weakening. This is seen on the DeMarker, which forms a slight bearish divergence. This makes us believe that the upward movement has lost its force, and it was just an impulse. We expect the couple to retrace back to the downward channel today. Key for this scenario is the level of around 1,296. This is the diagonal support from the broken channel and is the key support for the currency pair now. Break outs below 1,296 give the opportunity for opening short positions in the direction of the overall downtrend.

Alternative scenario: Positive fundamentals, especially from the Brexit negotiations, will give further momentum to the upward impulse. At this stage, we think the technicals are strongly in favor of the dollar. But positive news from the Brexit talks could reverse the trend. Given the important data we are expecting today from the UK, the volatility of the market will be higher and we expect many "fake" movements.

Read more:

• GBPBGN: increase in price is more probable from the current levels
• EURGBP: probability for an upcoming downward impulse
• GBPUSD short term sentiment in front of important data at 11:30 (GMT+3)
• A price below 2.268 can lead to a new decline by the pound
• Pound rises after the defeat of May’s Brexit deal