GBP/USD IN FOCUS AS BREXIT COMES INTO FURTHER VIEW

It’s a big day in the UK and we will likely see updated headlines throughout the session. Brexit negotiators have come to an agreement on a proposed deal, and at this point, Theresa May needs to sell it to her cabinet to gain approval. This appears to be a big ‘if’ at this point, but if successful, the door remains open for the later-month summit between the EU and the UK to further iron out details. This is far from a certainty, and given the volatility in UK markets around this theme yesterday, we may still be in for a bumpy ride.

Sterling initially popped-higher as news that negotiators had come to a resolution. But, as the draft of that deal leaked, optimism faded and prices soon moved back down to the 1.2900-handle. At this point, GBP/USD has had a rather active past few days of price action in both directions, and Theresa May is currently pitching this proposal to her cabinet.

GBP/USD 30-MINUTE PRICE CHART: TWO-WAY VOLATILITY THIS WEEK AS DRIVEN BY BREXIT HEADLINES

On a longer-term basis, GBP/USD continues in a rather aggressive range that’s been in play for almost four months now. Prices in the pair were on a bee-line lower from April and into July, but in mid-August ran into a key Fibonacci retracement that finally helped to stem the bleeding. This level takes place at 1.2671, and this is the 23.6% Fibonacci retracement of the Brexit move in the pair, taking the June, 2016 high down to the October 2016 low.

Since that support came into play in mid-August, prices have been displaying an element of mean reversion with both lower-highs and a slightly higher-low coming into play. This can complicate trend strategies on shorter-term charts given lack of recent sustainable trends. But – it can also highlight levels of interest that may come into play for longer-term strategies; with bulls looking for topside breaks through levels like 1.3117 or, perhaps a bit further away at the three-month-high of 1.3306 to usher in topside strategies on the pair.