GBP: Close Above 1.30 Technically Bullish & Likely To Trigger A Squeeze Of More Shorts – MUFG

The British pound is bouncing up and down on Brexit headlines. What do technical levels tell us?

Here is their view, courtesy of eFXdata:

MUFG Research discusses GBP outlook and maintains a constructive view in the medium term and flags yesterday’s close above the 55-days moving average at 1.30 as a technical bullish signal in the near-term.

“The pound is continuing to rebound following last month’s heavy sell off. Most notably cable climbed back above the 1.3000-level and closed above its 55-day moving average for the first time since April. It provides a bullish technical signal for the pound.

Once again the pound strengthened sharply on the back of recent positive Brexit headlines which have triggered a squeeze of short positions built up in an anticipation that Brexit risk is more likely to get worse before it gets better. The trigger for a stronger pound on this occasion were comments from Chief Brexit negotiator Michel Barnier in which he expressed optimism that a deal could be reached in the coming months. It follows on from his reported comments on Friday that the withdrawal agreement is 90% complete. Recent progress in negotiations has increased confidence that a final Brexit agreement can be reached by October or November at the latest,” MUFG argues.

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