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Sep 05 - 12:12 PM
GBP/USD - COMMENT-Brexit Reality May Pull Sterling Back From Recent Highs
First appeared on eFXplus on Sep 05 - 10:25 AM

Traders are still unwinding sterling shorts after the UK parliament diminished hard-Brexit risk this week, lifting GBP/USD further away from Tuesday's 35-month low at 1.1959 , but the realities of British politics could put a brake on the pound.
GBP/USD encountered resistance just above the 55-DMA around 1.2346 and ahead of the daily cloud base at 1.2354.
Though recent parliamentary maneuvers reduced the odds of the UK crashing out of the EU on Oct. 31, taking option volatility lower , much of sterling's rise may just be profit taking.
However, a further delay still leaves outstanding Brexit issues nL5N25W248 unresolved. While two-month vol has fallen, five-month volatility, which will include the potential new Brexit deadline, should rise.
As sterling eyes further gains, the daily cloud top at 1.2432 may be pivotal.
GBP/USD has held below the daily cloud since May 2019, when sterling traded at 1.3190. A rise above the cloud would put the 100-DMA at 1.2551 and 200-DMA at 1.2784 in view.
But with little progress on the Irish backstop or a new Brexit deal a return trip to the sub-1.20 GBP/USD low is not out of the question.

GBP Chart: Click here

Refinitiv IFR Research/Market Commentary


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