GBP/USD erases early losses back above 1.2500; Article 50 on collision course
|Currently, GBP/USD is trading at 1.2533, marginally up +0.02% on the day, having posted a daily high at 1.2544 and low at 1.2417
Today's delay for PM May's plan has not changed the 'Article 50' outlook and March is when they expect to exit the 'Single Market'. The GBP/USD pair has been spinning 120-pips from high to low during the European and NA session after the UK's Supreme Court ruled against the Government.
Article 50: Defeat or not, March is it
Danske Bank Research Team notes on the matter, "We do not think the Supreme Court’s ruling will delay the triggering of Article 50. Brexit Minister David Davis has said the government will introduce Article 50 legislation ‘within days’ (see Reuters, UK to introduce Article 50 legislation ‘within days’ – Brexit minister, 24 January) and it seems unlikely that either the Conservative Party or Labour will block the legislation in the House of Commons. In a non-binding vote in December, MPs voted overwhelmingly to support PM Theresa May’s Brexit timetable. It could be more problematic to pass the legislation in the pro-EU House of Lords where the Conservatives do not have majority, but it would probably create a constitutional crisis if the House of Lords tries to block or delay Brexit, see Reuters, Brexit plans unlikely to be slowed by Article 50 defeat, 24 January."
They further report, "In the Supreme Court’s judgement, it says in section 122 that ‘What form such legislation should take is entirely a matter for Parliament’, which allows the Government to present a very short bill, which makes it more difficult for the MP’s to make amendments. Both Labour and the Scottish National Party (SNP) have already said that they want to be heavily involved during the negotiation process."
Technical levels to watch
In terms of technical levels, upside barriers are aligned at 1.2544 (today's high) and above that at 1.2670 (high Nov.11). While supports are aligned at 1.2409 (50-DMA) and below that at 1.2250 (horizontal support).
On the long term view, if 1.1985 (low Jan.16) is in fact, a short-term bottom, the upside runs all the way towards 1.3210 (short-term 23.6% Fib). However, without removing the 'hard' dark cloud from all Brexit negotiations, the sterling faces a gargantuan resistance level against 1.3978 (short-term 38.2% Fib) and 1.4153 (long-term 23.6% Fib).
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