GBP/USD analysis: Brexit´s trigger to take center stage
|GBP/USD Current price: 1.2472
The GBP/USD pair fell on Friday, but advanced for a second week in-a-row, settling at 1.2470. The Pound got a boost last Tuesday, following the release of higher-than-expected UK inflation figures, exacerbated by broad dollar's weakness ever since the week started. Nevertheless the pair was unable to advance to retake the 1.2500 level, despite multiple intraday attempts to break higher. Attention this week will center in PM May's announcement of the beginning of Brexit, as the UK government will trigger the art. 50 of the Lisbon treaty this Wednesday. News released over the weekend showed that the Labour Party will announce its conditions for backing any deal with the EU this Monday, anticipating that they would only support a deal that has the ‘exact same benefits’ as the single market, raising the bar for May's negotiations. Still early to speculate on the outcome, the UK will indeed face a rough couple of years from now on. The pair topped this past week at 1.2530, 10 pips shy of the 23.6% retracement of the January's rally, and the daily chart shows that technical indicators have lost their upward strength, but remain near overbought territory, whilst the price is well above a modestly bullish 20 SMA, indicating that the pair may extend its bearish move, particularly if the mentioned 1.2530/40 region continues to cap the upside. In the 4 hours chart, the price broke below its 20 SMA for the first time since mid March, while technical indicators have turned south, currently around their mid-lines, supporting a downward extension. 1.2425 is the 38.2% retracement of the mentioned rally, and a break below it will likely result in a steeper decline towards 1.2330/50.
Support levels: 1.2425 1.2380 1.2340
Resistance levels: 1.2500 1.2540 1.2585
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