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The British pound took an unexpected jump to start off the new trading week, and with volatility likely to stay high as Brexit headlines continue, we’re checking out both bull and bear setups in GBP/USD for potential short-term pips.

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Fresh Market Headlines & Economic Data:

Dow rallies 400 points, building on Friday’s sharp gains, banks rise

Oil steady as surging virus cases cloud demand outlook

China’s Rebound Lost Momentum in September, Early Data Show

Pelosi believes coronavirus stimulus deal still possible as Democrats prepare new package

Britain, EU start key week of Brexit talks with ‘better mood music’

ECB’s Visco says euro’s strength is a worry

Germany to issue 6 billion euros more debt than planned in fourth quarter due to coronavirus

UK eyes tougher COVID-19 restrictions for England as outbreak spreads

Japan to gradually lift COVID travel alerts from October

Children have 44% lower odds of catching COVID-19 than adults – UK analysis

Merkel says German coronavirus infections could hit 19,200 a day

Upcoming Potential Catalysts on the Economic Calendar

Fed Mester speech at 6:00 pm GMT
Tokyo CPI at 11:30 PM GMT
Bank of Japan Summary of Opinions at 11:50 pm GMT
Japan Leading Economic Index at 5:00 am GMT (Sept. 29)

What to Watch: GBP/USD

GBP/USD 1-Hour Forex Chart
GBP/USD 1-Hour Forex Chart

Big move on the session for Sterling pairs as traders reverse recent bearish sentiment thanks to positive comments today from officials that lowered the odds of seeing negative interest rates soon from the Bank of England, and hopes that Brexit talks will improve as we head into the last round of scheduled talks this week.

This prompted a full daily ATR (roughly 135 pips) move higher in GBP/USD to retest a previous consolidation range between 1.2900 – 1.3000. With the good vibes likely priced in for the session (as indicated by the overbought signal on stochastic), is this an opportunity for the bears to short back into the medium-term bearish trend on Sterling?

If you are a bear, maybe consider another retest and reversal of the 1.2900 handle before building a short play in case we see further dollar weakness off of the early round of positive risk sentiment to start the week.

If you’re a bull on GBP/USD, then a pullback down to the minor area of interest around the 1.2830 handle may be enough to draw in intraday trend players, especially if stochastic makes its way back to signal oversold conditions.

If broad risk sentiment holds positive to keep pressure on USD and we see bullish reversal patterns in that area, consider a long swing play with a target of the 1.3000 major psychological handle, reachable in the next few sessions if Brexit / monetary policy rhetoric continues to improve.