GBP/USD Extends Gains Following Break of Bullish Flag Pattern
GBP/USD broke higher in early trading on Tuesday and has taken out resistance at 1.2266 which was a hurdle last week.
A broadly weaker dollar has helped the pair advance as well as further progression in Brexit talks between the EU and the UK.
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Reuters reported earlier today that the EU is willing to make a concession ahead of talks next week. The issue at hand is fisheries as the UK wants to regain control of its waters and fish which EU fishermen have otherwise enjoyed the benefits of.
Brexit negotiations have been overshadowed by Coronavirus developments as of late but UK PM Boris Johnson continues to see a deal being reached by the end of the year.
The PM has seen some backlash from the public over his handling of the Cummings matter this week. Cummings, a close adviser to Johnson broke lockdown restrictions by driving 250 miles to the north of England. Johnson’s defended Cummings which has angered citizens and some members of the Parliament.
Douglas Ross, a Scottish junior minister conflicted by the way Johnson handled the situation, has handed in his resignation today.
Technical Analysis
GBP/USD has broken higher from a bullish flag pattern and has rallied above a key resistance level at 1.2266. This level previously served to hold the pair lower in late April and early May.
Further, the 1.2266 level marked the lower bound of a range that had been playing out for more than a month, ahead of a breakdown about two weeks ago.
In this context, the upward move seen today is significant and stands to keep the pair well-bid on dips over the near-term.
For the session ahead, the 1.2266 level is now seen as strong support. Not only are buyers likely to step in at the level, but GBP/USD bears that are on the wrong side of the trade may also look to exit there.
To the upside, the next level of resistance is seen at 1.2373.
Bottom Line
- GBP/USD shows renewed upward momentum as the dollar has weakened broadly and progress has been made in Brexit talks.
- A major level was breached to the upside today which suggests dips in GBP/USD will be well-supported over the near-term.
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