GBP/USD is steadily climbing, testing the 200-hour moving average now
Price is now attempting to move above the 200-hour MA (blue line) @ 1.3015 and by doing so, buyers will establish a near-term bullish bias in the pair. The dollar is holding a little weaker so far to start the day so it’s hard to look more into the slow run higher here.
But more so is the fact that price action remains contained between 1.2900 and 1.3050 for the most part despite the slew of Brexit headlines over the past two days.
In overnight trading, ministerial resignations and worries over parliament not passing the meaningful vote led to a drop in the pound which saw it test below 1.2900 again. However, that was short-lived as Cabinet signs off on May’s Brexit deal. The run higher then tested just above 1.3050 but then fell back to move below the 200-hour MA as well.
In terms of hourly breaks, price is treading between support from the 23.6 retracement level and resistance at the 61.8 retracement level. But I’d be looking more towards moves below 1.2900 or above 1.3050 on the close to confirm any breaks to the upside or downside respectively.
Right now, it’s still all about the headlines but trading over the next few days will center mostly around the voting landscape in the Commons. If there is a growing consensus that parliament members will go against May’s deal, the pound will suffer as a result but that uncertainty will not likely lend too much to the downside until the rhetoric becomes overwhelming — since there is still time between now and December for change.
I reckon cable could fall towards 1.2500 levels at most on such sentiment. However, the upside is definitely more attractive here. If parliament voting starts to swing in favour of Theresa May, the uplift in the pound will be rather strong in my view. Because such an outcome eliminates all the uncertainty at hand and will only result in an orderly Brexit outcome and that is a major win after the many months of limbo.
What’s more is that an orderly Brexit would also put the BOE’s rate hike path on track and also feed into the rhetoric that economic growth in the UK will rebound as businesses are set to receive more certainty and assurances. I’d be looking towards a solid jump towards 1.4000 in cable in such an event.
But let’s not get too carried away and digest the headlines one at a time. Who knows? There could still be plenty of twists and turns along the way, starting with the possibility of a no-confidence motion being tabled against Theresa May some time in the next week.