The pound was rejected from early-November highs above 1.31 reached earlier in the day but remains elevated, preserving the bullish bias in the daily and weekly charts on Friday. The UK currency is supported by the receding risks of a no-deal Brexit as well as the potential DUP backing of May’s Plan B. The party hinted it could say ‘yes’ if the plan includes a clear time-limit to the Irish backstop.
Despite the heightened uncertainty around the passing of the PM’s updated plan, which in fact doesn’t differ much from the Plan A, the incoming headlines are enough to feed into further rally in the pound. In current conditions, GBP remains a good ‘buy on dips’ trade, which means the potential corrections will be limited and fresh highs are yet to come, unless the important ‘bearish’ news come from the Brexit front.
The key is the fact that all the extreme scenarios for Brexit are ruled out now, and the Parliament members could become more flexible as the official exit date is getting closer.
As such, the pair that now stalled around the 20-DMA below 1.31 will likely further attract the bulls and could challenge the November highs at 1.3175 in the days to come. By the way, weaker dollar amid the ongoing US government shutdown could ease the way higher for GBPUSD.