Big Ben and Houses of parliament, London. Image source: sborisov © 123RF.com
The pound jumped today on speculations that Boris Johnson would be willing to continue the trade deal negotiations with his European counterparts after the crucial October 15th date, which he had previously selected as a deadline to reach a break in the impasse.
The deadlock was caused by the unwillingness of the two sides to compromise on the issue of fishing rights, which prompted Johnson to threaten to break off the talks with Brussels altogether. Such a scenario would lead to a no-deal Brexit at the end of the year; something that is dreaded by British and European investors alike.
These speculations are either going to be affirmed or dismissed by the end of the week, which is when Johnson is expected to shed more light on his next move. Should the PM decide to show more leniency in the negotiations, a trade deal might yet be ratified in the European and British parliaments by December 31st.
An increasing number of experts is now seeing such a deal as a necessity given the deepening of the coronavirus crisis, and the continuous slump of the British economy, which was exacerbated this week by the muted labour data for the previous quarter.
The jump of the GBPUSD pair from today encapsulates the renewed enthusiasm of traders and investors alike, who are now focused on the following summit between the two involved parties.
Moreover, today's upswing is inlined with our forecasts from yesterday, which projected an imminent trend reversal.
As can be seen on the daily chart below, the GBPUSD recently finalised the corrective ABC pattern and is now ready to resume trading higher. After rebounding from the 38.2 per cent Fibonacci retracement level at 1.26892, the price broke out above the 23.6 per cent Fibonacci at 1.29932 as well.
Following today's crucial rebound back above the psychologically significant resistance level at 1.30000, the price is now ready to resume trading higher.
Provided that the market remains heading further north in the near future, the next significant target level for the reinstated rally is encapsulated by the major resistance level at 1.34000. The latter represents the next major psychological barrier.
GBPUSD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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