Reaction From Support to Decide Directional Bias
GBP/USD reversed lower this week after news that British Prime Minister Boris Johnson was looking to suspend parliament. Yesterday, Britain’s Queen formally approved the request, giving Johnson his victory. It was largely expected that the Queen would not oppose the request as she avoids involvement in politics.
GBP/USD saw bit of a relief rally late in the day yesterday but it was short-lived. Downside pressure continued in early day trading today to bring the pair back to a critical technical juncture. The pair is testing a rising trendline that has held it higher in the recovery that has been taking place over nearly three weeks. If it drops below it, technical traders will likely view the break as a signal to sell.
Johnson’s latest move has recieved a lot of criticism and opposition. He has reasserted, in a rather forceful manner, that he will deliver an EU exit no matter what it takes. The focus now will be on any type of reaction from EU officials. Particularly, if they are willing to budge on the issue of the Irish backstop to prevent a no-deal Brexit.
In the session ahead, the 1.2153 price point is critical. This level held the pair higher yesterday and remains a pivotal point for the exchange rate. It reflects a horizontal level, but more importantly, it intersects with a rising trendline.
This trendline has held the almost three-week recovery higher on several dips. A break of it would send a technical signal that the upward move has finished.
One thing to keep in mind is that throughout this recovery some traders have been waiting for a signal to short. A break lower here would offer a technical signal. It safe to say that Johnson’s latest move has reignited Brexit fears to offer a fundamental signal.
- GBP/USD is at a critical technical juncture. A break here stands to have further bearish implications.
- To focus point now is on any type of reaction from EU officials on Johnson’s latest move.