GBP/USD analysis: a 'new' Brexit deal temporarily lifted the Pound

Valeria Bednarik FXStreet

GBP/USD Current Price: 1.2701

PM May offered MPs a vote on a second referendum, as long as they approve a withdrawal deal.
The UK will publish April inflation figures, annual core inflation seen up by 1.9% vs. the previous 1.8%.

The GBP/USD pair jumped to 1.2813 mid-US session following headlines indicating that UK PM May deal would offer a new Brexit option to the Parliament, also allow voting on a second referendum. The Brexit political chaos has been a significant drag for Sterling, further weighing after cross-party talks ended without an agreement. PM May surprised the markets this Tuesday by announcing a new Brexit bill, which details will be unveiled in the next few days, clarifying that she still opposes a second referendum. Furthermore, she said that a Brexit deal would be needed first. The encouraging headline was offset by May sticking to her guns. Once she was done, DUP Deputy Dodds said that while they might need to wait to see the text of the 'new bill,' it was clear that fatal flaws remain unchanged. Opposition leader Corbyn, later added: "we won't back a prepackaged version of the same old deal - and it's clear that this weak and disintegrating government is unable to deliver on its own commitments." The GBP/USD pair returned to pre-announcement levels afterward.

This Wednesday, the UK will release April CPI figures, with annual core inflation seen up by 1.9% vs. the previous 1.8%. The kingdom will also publish PPI data for the same period, seen posting a modest monthly advance, and the Retail Price Index, seen up by 0.8% MoM and by 2.8% YoY.

Ahead of the Asian opening, the GBP/USD pair is down for the day, barely holding above the 1.2700 level. The sharp intraday spike has helped it correct the extreme oversold conditions, although it didn't affect the dominant bearish trend. The 4 hours chart shows that the pair closed the day below a bearish 20 SMA, while the Momentum indicator turned flat below its 100 level and the RSI resumed its decline, currently at 32, in line with the mentioned bearish trend. The pair could correct higher, although selling interest will likely add at higher levels. A vital support is February monthly low at 1.2668, with a break below it anticipating a steeper decline.

Support levels: 1.2700 1.2665 1.2630

Resistance levels: 1.2750 1.2785 1.2820

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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