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GBP/USD: Recovery underway towards 1.3190/1.3260, Brexit developments in spotlight

  • Brexit deadline extension has its own challenges for the UK PM Theresa May.
  • The quote needs to cross 1.3190 and 1.3260 resistances in order to justify its bounce off 1.3000 round-figure.

The British Pound (GBP) is taking the bids near 1.3140 versus the US Dollar (USD) ahead of London open on Friday. The GBP/USD pair has been on a recovery mode since Thursday-end as EU leaders finally agreed over the Brexit deadline extension with the two-factor system giving unconditional stretch till April 12. Though, uncertainty over the Brexit still remains on cards as the UK PM Theresa May has to jostle with the British parliament soon. Also directing the immediate trade sentiment will be second-tier data from the US.

The EU lawmakers agreed to shift the Brexit deadline off from March 29 during late-Thursday. The news report triggered the GBP/USD pair’s U-turn from 1.3000 round-figure and has been pleasing buyers off-late as the USD is likely witnessing profit-booking after yesterday’s overall advances.

In spite of getting unconditional deadline extension till April 12, PM May has to convince lawmakers at home to support her plan in the parliament’s voting sometimes next week in order to grab the May 22 data for the Britain to leave the EU. Having been defeated twice at home, it would become tough for PM May to persuade British politicians for her third Brexit plan considering the fact that it won’t be too different from the previous one.

Other than Brexit uncertainty, US data could also play their role in directing near-term trade sentiment. Among them, the current month Markit composite purchasing manager index (PMI) and February month existing home sales could gain market attention.

The US Markit PMI composite could soften to 55.2 from 55.5 but likely increase in existing home sales to 5.10M over 4.94M earlier might favor the greenback.

GBP/USD Technical Analysis

While a descending trend-line joining highs since March 19 offers immediate resistance around 1.3190, a week-long resistance-line at 1.3260 could limit the pair’s further advances.

On the downside, eleven-week old ascending trend-line and 50-day simple moving average (SMA) around 1.3060/65, near to recent low at 1.3000 round-figure, can please sellers ahead of questioning their strength by 200-day SMA figure of 1.2980.