GBP/USD Analysis: Sterling underpin by hopes

Valeria Bednarik FXStreet

GBP/USD Current Price: 1.2284

Amber Rudd, the Conservative Whip, resigned over the weekend.
UK Parliament to continue working on preventing a hard-Brexit this Monday.
GBP/USD holding on to higher ground alongside hopes, risk skews south below 1.2250.

The GBP/USD pair settled near the five-week high of 1.2353, easing Friday amid renewed dollar’s demand and profit-taking ahead of the weekend. The Sterling rallied on the back of MPs actions to block a hard-Brexit by October 31^st, as planned by PM Johnson. The UK leader has multiple times said that he would take the UK out of the EU whatever the cost by the set date. He also noted that it was a negotiation tool, to force it’s EU counterparts to re-open the Withdrawal Agreement. Nevertheless, the Parliament revolted and voted to extend Brexit until January 2020, also rejecting Johnson’s motion for a general election.

Brexit turmoil continues

Turmoil continued over the weekend, as Amber Rudd, the Conservative Whip, resigned to the cabinet and surrendered her position, saying that the government is mostly focused on preparing for a no-deal Brexit, adding that she does “longer believe leaving with a deal is the government's main objective," accusing PM Johnson of an assault on democracy after he expelled 21 Conservative members. News is no good for Pound, yet the currency will likely hold on high ground as long as hopes that the hard-Brexit will be avoided remain high.

This Monday, the UK will release several relevant figures, including Manufacturing Production, Industrial Production, the Trade Balance, and the monthly GDP estimate for July. There’s a good chance of all of them would be overshadowed by yet another Parliamentary discussion on Brexit.

GBP/USD short-term technical outlook

The GBP/USD daily chart indicates that the rally is losing steam, as, despite holding above its 20 SMA, the pair is below bearish 100 and 200 SMA. Furthermore, technical indicators have begun to ease within positive levels. The 100 SMA at 1.2450 comes as a critical psychological barrier as once beyond it, the rally can continue without fundamental background. The 4 hours chart shows that the pair continues developing far above its moving averages, with the 20 SMA heading firmly up above the larger ones, and as technical indicators retreat from over readings, still above their mid-lines, not enough to consider an upcoming slide, this last, more likely on a break below 1.2250.

Support levels: 1.2250 1.2210 1.2175

Resistance levels: 1.2315 1.2360 1.2400

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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