GBP/USD analysis: Brexit-related political turmoil to keep pressuring the Pound

Valeria Bednarik FXStreet

GBP/USD Current price: 1.2828

More no-confidence letters on PM May are expected this week.
GBP/USD could extend its decline beyond the yearly low, so far at 1.2690.

Following Thursday's collapse, the GBP/USD pair managed to regain some ground by the end of the week to finish it at 1.2828. The UK government, and particularly PM May, are still to face some bumps ahead. So far, 24 member's of May's party have written no-confidence letters, half the number needed to challenge her leadership. The rebellion was a result of most Tories thinking that the Brexit agreement sealed in the Cabinet last week doesn't honor the Referendum result. Mrs. May wrote an article for The Sun during the weekend, repeating what she said in a press conference Friday. Pretty much, she said that there's no alternative to her plan and that if MPs reject this deal, " they will simply take us back to square one." More letters are expected to be submitted these days, and GBP crosses will likely remain volatile. An EU summit to discuss Brexit with take place next weekend, starting Sunday, Nov. 25.

Technical readings are aligned with the fundamental background, as the risk remains skewed to the downside in the daily chart, with the GBP/USD pair developing well below a bearish 20 DMA and with the 200 EMA over 400 pips above the current level. The Momentum indicator in the mentioned chart hovers around its mid-line, while the RSI consolidates around 43. In the 4 hours chart, the bearish case is also strong, as Friday's advance stalled below a bearish 20 SMA, currently around 1.2890 while technical indicators lack directional strength well into negative territory after correcting extreme oversold conditions. Renewed selling pressure below the 1.2800 level could see the pair retesting last week's low at 1.2723, and even extending its decline beyond the yearly one at 1.2690, particularly if political turmoil in the UK deepens.

Support levels: 1.2810 1.2765 1.2725

Resistance levels: 1.2845 1.2890 1.2530

View Live Chart for the GBP/USD

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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