GBPUSD Analysis and Talking Points
- GBPUSD Bearish as Theresa May’s Last-Ditch Attempt Looks Set to Fail
- GBP Technical Analysis | Focus on Sterling Flash Crash Trendline Support
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GBPUSD Bearish as Theresa May’s Last-Ditch Attempt Looks Set to Fail
Overview
Since we highlighted that GBPUSD was at risk of a bearish breakdown (full story), the pair has dropped near 2% to hit the lowest level since the beginning of January. Yesterday, saw Theresa May make a last-ditch attempt to win support for the withdrawal agreement bill, by offering an option to vote on whether to have a second referendum. However, this had failed to win over the sceptics with both the ERG and Labour party signalling that they will not vote in favour of the bill.
Consequently, the end of Theresa May looks to be quickly approaching, particularly with the Conservative Party set to face a weak showing in the upcoming EU elections. Thus, markets are beginning to price in a new Tory leader, which could be a harder Brexiteer than PM May (Boris Johnson leading in betting markets). In turn, the outlook for GBP remains just as weak as the political environment.
Risks
A weaker than expected showing for the Brexit party in the EU elections could potentially provide some relief for the Pound, particularly if the Lib Dems perform strongly.
A new Tory leader that is less of a Brexiteer than the likes of Boris Johnson could also see a modest bounce in the pair.
GBP Technical Analysis | Focus on Sterling Flash Crash Trendline Support
On the technical front, eyes are on the 1.2670 level, which represents the Jan 15th low. A closing below, risks a test of trendline support (1.2540) from the GBP flash crash. Elsewhere, the 2018 low resides at 1.2476. On the topside, resistance is situated at 1.2785 (61.8% Fib from 1.18-1.43 rise), while the 200DMA sits at 1.2955.
GBPUSD PRICE CHART: Weekly Time Frame (Aug 15 – May 29)
--- Written by Justin McQueen, Market Analyst
To contact Justin, email him at Justin.mcqueen@ig.com
Follow Justin on Twitter @JMcQueenFX
