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GBP/USD RSI Flirts With Overbought Territory- Opening Range In Focus

By Kurt Osterberg · On December 4, 2017

The British Pound remains bid coming into the first full week of December, and GBP/USD may continue to exhibit a bullish behavior over the coming days as the U.K. and European Union (EU) inch towards a Brexit agreement.

Market participants are likely to pay close attention to the headlines coming out of the U.K. as Prime Minister Theresa May meets with EU officials and is scheduled to appear in front of the House of Commons for questions later this week. Progress towards the next phase of negotiations may keep Sterling afloat as it curbs the risk for a ‘hard Brexit,’ and the pound-dollar exchange rate may continue to gain ground ahead of the Bank of England’s (BoE) last 2017 meeting on December 14 as the central bank starts to move away from its easing-cycle.

Even though the BoE is widely expected to keep the benchmark interest rate at 0.50%, Governor Mark Carney and Co. is likely to prepare U.K. households and businesses for higher borrowing-costs as ‘most recent assessment of the outlook for inflation and activity, contained in the November Inflation Report, was conditioned on a market path that implied two additional 25 basis point increases in Bank Rate over the three-year forecast period.’ In turn, the BoE may stay on course to deliver one rate-hike per year, and the shift in monetary policy may keep GBP/USD within the upward trending channel from earlier this year especially as the bullish momentum appears to be gathering pace.

GBP/USD Daily Chart

Broader outlook for GBP/USD remains constructive, with the pair at risk of making a run at the 2017-high (1.3657) as the Relative Strength Index (RSI) extends the bullish formation from November and flirts with overbought territory, with a break above 70 raising the risk for a further advance in the exchange rate.

Need to keep a close eye on the monthly opening range as GBP/USD struggles to clear the 1.3560 (50% expansion) region, with the next topside hurdle coming in around 1.3690 (61.8% expansion) to 1.3700 (38.2% expansion) followed by the Fibonacci overlap around 1.3830 (61.8% retracement) to 1.3870 (78.6% expansion).

Will keep a close eye on the former-resistance zone around 1.3280 (23.6% expansion) to 1.3300 (100% expansion) for fresh support, which sits above the 50-Day SMA (1.3241).