GBP/USD Analysis: turmoil ahead of a new UK PM
|GBP/USD Current Price: 1.2481
- Tory’s Leadership Contest to take center stage this Tuesday.
- Boris Johnson’s victory likely to send Pound sharply lower.
- GBP/USD lost 1.2500, returns to bearish ground ahead of the critical political announcement.
The GBP/USD pair has fallen sub-1.2500, ending the day with losses at around 1.2480. The Sterling came under selling pressure following news indicating that Sir Alan Duncan has resigned as foreign minister, in the middle of a conflict with Iran, after the country seized a UK oil tanker last Friday. Also, the UK Finance Minister, Philip Hammond, has said he will resign if Boris Johnson wins the race toward Downing Street, something that will be defined tomorrow. Johnson’s victory will likely fuel Brexit-related uncertainty, therefore play against the Pound. The UK didn’t release relevant macroeconomic figures at the beginning of the week, but this Tuesday it will publish the CBI Industrial Trend Survey on Orders for July, previously at -15, and the FPC Meeting Minutes. Nevertheless, the result of the Tory´s Leadership Contest will likely overshadow everything else.
GBP/USD short-term technical outlook
The GBP/USD pair returned to levels below the daily descendant trend line coming from June’s high, which provided intraday resistance throughout the day. In the 4 hours chart, the pair is now developing below a bullish 20 SMA, while the Momentum indicator offers a strong downward slope, currently challenging its 100 level, and with the RSI attempting a recovery within negative levels. The risk has skewed to the downside, although the market will likely wait for the announcement of the next PM before taking any action. A bearish breakout of the 1.2420 support will likely result in a fresh multi-year low sub-1.2381.
Support levels: 1.2450 1.2420 1.2375
Resistance levels: 1.2500 1.2545 1.2590
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