Brexit news is likely to bring another major move for sterling and this could be this week
No move in Pound despite the fact that the manufacturing production numbers were weak and the index of services has seen a fairly large drop. But looking at the GDP data, it becomes clear that the country's economic health isn’t that. It is on course for its best calendar quarter in nearly two years.
In terms of currency pairs, if you are measuring the strength in Pound against the euro, then it is definitely a wrong strategy. Yes, the GBP/EUR pair is trading near 3-1/2 month high, but this is mainly because of the weakness in the euro. The real strength of the British Pound can be measured against the dollar.
Moving forward, a strong move is still on the card and this move will be driven by Brexit headline. It is likely that traders will play a catch-up game. This is because the price hasn’t broken out of its range (1.29-1.33). The Brexit headline this week will push the price out of this range. Looking at the spot and options market, one element is pretty clear that the British pound remains out of favour.
Speaking purely from a technical perspective, the price is trading above its upward trend line (shown in orange). This confirms that the upward trend intact. Further confidence in the upward trend comes from the fact that the price is trading above the 50 and 100- day moving average (shown in green and yellow respectively).
For those who are holding long positions on the GBP/USD pair, the price could be forming a double top. This is pattern which usually pushes the price lower.
The support level is at 1.2783 and the resistance is at 1.3360.