Chart of the Day GBPUSD

GBPUSD Two Way Trade - Probable Price Path

The market is waiting to see a new round of trade talks between the EU and the UK this week. The recent rebound in underwriting interest supports the performance of the pound. Sterling may stabilize 100-day average of 1.257 against the US dollar in the short-term, or test the high of 1.264 on April 30 and the low of 1.29 on May 29. Sterling continued to build with other risky currencies, closing 0.5% higher against the US dollar to 1.255, a one-month high, and once broke the 1.26 mark this morning. A spokesman for the British Prime Minister’s Office pointed out that it is the wishful thinking of the European Union to compromise on fisheries and fair competition in trade negotiations. UK property prices fell 1.7% month-on-month in May, the largest decline since 2009. The US dollar index continued to be under pressure, closing down 0.2% to 97.7. It fell for the fifth time in the past six trading days. It fell more than 0.2% to 97.4 this morning, setting a new low since mid-March. U.S. 10-year Treasury securities rose nearly 3 basis points to 0.685%.

The latest CFTC numbers show an increase in short positions as Brexit concerns resurfaced and the prospects of negative Bank of England rates attracted fresh selling. Despite the negatives, GBPUSD has benefited from a weaker dollar and into Friday's close recorded back-to-back bull weeks. This week sees another round of talks between Britain and the European Union on any possible extension, and although market optimism for an agreement by the end of the month is low, an overly short sterling market has been squeezed.

From a technical and trading perspective, GBPUSD is set to test a supply zone at and just above 1.2650, bears will be watching for intraday/daily reversal patterns to emerge here. Short exposure should be rewarded on such signals targeting a move to test the monthly pivot and ascending trendline support, before basing again to ultimately challenge the long awaited 1.28 upside objective. A daily close through 1.2650 would negate the pullback thesis and open a move to directly challenge teh 1.28 objective

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