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GBP/USD – Headed to 1.35?
Sterling was supposed to hit a one-month high on the back of Brexit news (Prime Minister May was suppose to increase her Brexit bill offer) but absolutely nothing was announced this past week. Instead, Ireland’s border became an unexpectedly significant hurdle to advancing Brexit talks. Although the border problems are serious ones, at the end of the day as long as May is not pushed out of the government she will be motivated to advance the talks and any progress would be viewed as positive for the currency. So while the Office of Budget Responsibility lowered their 2017 to 2020 GDP forecasts, further weakness in the U.S. dollar or sterling supportive Brexit news could take GBP/USD to 1.34 easily. In the week ahead, the U.K.’s manufacturing PMI report is the most important piece of data on the U.K. calendar and given the sharp rise in industrial orders, there’s scope for an upside surprise that could extend GBP/USD’s rally
Technically, GBPUSD spent all of last week trading above 1.3175. This is significant because it means that the 20 and 50-week SMAs along with the 23.6% Fibonacci retracement of 2014 to 2016 decline held as support. As long as this level continues to hold, GBP/USD should break 1.3400 and make its way to the September 2016 swing high of 1.3445. Above there, the next stop will be 1.35.