The GBP/USD currency pair has wilted over the past two weeks to trade at levels last witnessed in mid-September 2018. This decline has partly been due to a continuous stalemate between the European Union and Britain in striking a Brexit deal.
However, there were some signs of positivity on Wednesday October 31, after UK’s Brexit Secretary Dominic Raab hinted a Brexit deal could be reached by November 21. This prompted the Pound Sterling to gain some ground on the greenback at some point pushing the pair well above the 1.2825 level.
Nonetheless some of those afternoon gains were later lost in the day pushing the pair back just below the 1.2800 level.
Technical Analysis
From a technical perspective, the GBP/USD currency pair just bounced off its current multi-month low of about 1.2690. From this point on, it looks like the only way is up and when you consider today’s comments from UK’s Brexit minister, then bulls will be more optimistic going into November.
Looking at the 4-hourly chart below, the most immediate target for bullish profits will be at around (R1) at 1.2830, which based on the current exchange rate of about 1.2765 would yield profits of more than 60 pips.
Since GBP/USD pair started spiraling down in mid-October, it made two notable rebounds before the current rebound. The first one resulted in gains of about 51 pips for those who acted with precision while the second one rebounded by 54 pips.
In the current round, the pair has already regained 76 pips after bottoming on October 30, which means that the rebound this time around could be more complete than it has been on those two previous occasions. Should this happen as highly expected, then (R1) becomes a realistic target for the bulls.
And should the UK and the EU proceed and announce a positive agreement on Brexit on November 21, 2018, then the bulls can begin to mull over potential profit targets at (R2) at around 1.2963 and at (R3) at the 1.3020 level.
One the other hand, the bears will be looking for opportunities at around the 1.2690 level, which based on the current exchange rate would yield profits of more than 70 pips if executed with precision.
The daily chart below also provides a more comprehensive view of how things could pan out in the next couple of months with the major support and resistance zones well marked.
The support zone at 1.2690 looks solid when extrapolated historically. It goes back to June 2017 when the GBP/USD pair last dropped below this level. Therefore, new grounds will have to be breached for the pair to drop further, which is why the bulls are likely to be more optimistic as we move to the tail-end of the year.
The daily chart shows that there are notable rebound and pullback zones within the main support and resistance zones. To check their potential impact on future exchange rate movements, the Fibonacci Retracements are placed to stretch the full distance between the support and resistance zones.
As illustrated, there is a rebound zone mid-level at around the 61.80% Fib level while a few candlesticks above it there is another mid-level pullback zone just around the 38.20% Fib level. These two zones are represented by (R1) and (R2) and could be potential intermediate targets for the bulls.
However, should the pair defy those zones and instead continue to advance upwards, then the main resistance zone at around 1.3266 becomes a major target that could yield profits close to 500 pips if well executed.
Fundamental Analysis
The GBP/USD currency pair on October 31, 2018, briefly traded at the 1.2830 level following Brexit comments by UK’s Brexit minister Dominic Raab. In a letter addressed to the House of Commons, Raab, stated “I would be happy to give evidence to the Committee when a deal is finalized and currently expect 21 November to be suitable.”
On Thursday, November 1, 2018, UK policymakers present quarterly reports and unveil their latest monetary policy decisions, which would provide more insights about the UK economy. Also, the Bank of England’s Carney will speak at noon on the interest rate decision.
On the other hand, the U.S. non-farm payrolls for October 2018 are out on Friday Nov. 2, while investors are also waiting updates on the US/China trade deal, which President Trump hinted to be a huge one recently.
Conclusion
In summary, the GBP/USD currency pair appears to be technically supportive of a bullish short-term, but the U.S. jobs data and Q3 GDP, later on, could render all the positivity around Brexit irrelevant sending the pair to new multi-year lows.