British pound loses energy, but maintains strong bullish potential

The pound tries to prolong its positive run at the start of the week, but purchases slow down compared to what was observed in previous days. At the time of this writing, the price of GBP/USD advanced modestly 0.10% to 1.3350, thus accumulating a revaluation of 3.2% so far in December.

The monumental victory of the Conservative Party of Boris Johnson in the general elections of December 12 has reinforced investor optimism, creating a more benign environment for the British currency.

With the absolute control of the British Parliament in the hands of the Tories, the baseline scenario involves the rapid ratification of the Brexit agreement signed by London and Brussels in October. This situation would eliminate one of the great uncertainties that the British economy has flown over the past three years and that has limited investment growth.

As the path of Brexit is clarified, the main macroeconomic variables of the English nation will begin to stabilize, laying the foundations for a period of gradual recovery of the pound sterling. Recall that in 2016, before the Brexit vote, the GBP / USD exchange rate was close to 1.4700, more than 1300 pips above its current level.

In this context, it is important to closely monitor the monetary policy announcement of the Bank of England scheduled for Thursday (December 19). No change or type of action is expected from the BoE, but the entity could offer valuable information on its evaluation of the economy following recent political events in the country. A more positive bias would reinforce the renewed momentum of GBP/USD, bringing the pair to new annual highs.

Request below the updated forecast of the pound sterling, based on a rigorous fundamental and technical analysis.

GBP / USD TECHNICAL ANALYSIS

After the confirmation of the flag pattern, the medium-term target of GBP/USD remains 1.3750. However, it is necessary to remain cautious, as the pair has been overbought in recent sessions following the results of the general elections in the United Kingdom as shown by the RSI indicator. This means that the pair could be vulnerable to a small downward correction before continuing upward.

GBP / USD TECHNICAL GRAPH