GBP/USD Forecast: Third meaningful vote out of the way, UK jobs data eyed for short-term impetus
|The British Pound suffered some fresh selling at the start of a new trading week and momentarily weakened below the 1.3200 handle after the speaker of the House of Commons, John Bercow, blocked the government’s motion for yet another vote on the UK PM Theresa May's Brexit deal, ruling that the same deal cannot legitimately be put back to the House unless there is a change. The GBP tumbled across the board in reaction to yet another blow to May's government, though the pair managed to recover nearly 70-pips intraday to finally settle near mid-1.3200s.
With the dismissal of the third meaningful vote, the government will have to come back with substantial changes in order to get the deal passed through the Parliament and (or) avoid a prolonged delay. Meanwhile, the UK Parliament has already ruled out the possibility of leaving without a deal and requesting an extension of Article 50 is the only option left for the government. However, the UK parliamentary votes are not legally binding and all 27 EU member states have to agree on the extension before it becomes official. Hence, the developments coming out of the EU leaders' meeting on Thursday and Friday will now play an important role in influencing the near-term sentiment surrounding the British Pound.
In the meantime, today's UK monthly employment details will be looked upon for some meaningful trading opportunities ahead of the latest FOMC monetary policy update on Wednesday and the BoE decision on Thursday. The UK unemployment rate is expected to hold steady at 4.0% and the number of people claiming unemployment-related benefits is seen falling to 3.7K from 14.K in the previous month. Meanwhile, average earnings excluding bonus are foreseen at 3.4% 3m/y and including bonus is foreseen softening to 3.2% 3m/y rate as compared to 3.4% previous.
From a technical perspective, the recent volatility now seems to have receded and the pair has been oscillating within a 100-pips broader trading range between the 1.3200-1.3300 handles. Hence, it would be prudent to wait for a convincing break through the mentioned trading range before traders start positioning aggressively for the pair's next leg of a directional move. Momentum beyond the 1.3300 mark could get extended back towards nine-month tops, around mid-1.3300s, before the pair eventually aims to reclaim the 1.3400 handle, coinciding with a short-term ascending trend-line resistance.
Alternatively, a follow-through selling below the 1.3200 handle now seems to accelerate the slide towards 1.3150-45 horizontal support, below which the pair is likely to turn vulnerable to break through the 1.3100 mark and head towards challenging its next major support near the 1.3070 region. The mentioned support coincides with a confluence region, comprising of another ascending trend-line and 50-day SMA, and should act as a tough nut to crack for bearish traders.
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