GBP/USD Forecast: Depressed below the double-top on Brexit and Trump

Pound bulls have probably breathed a sigh of relief after Mark Carney, Governor of the Bank of England, refrained from causing carnage – skipping recent developments in his speech. However, that is as far as relief goes.

One day before PM Theresa May officially quits her post as leader of the Conservative Party and it is unclear who will enter 10 Downing Street. Environment Secretary Michael Gove has suggested that Brexit may be temporarily delayed – differing from his competitors Boris Johnson and Dominic Raab. The trio seems to be in the lead, but the contest is wide open.

And while US President Donald Trump has offered the UK a "phenomenal deal" after Brexit, he seems to want a wall on the border between the Republic of Ireland and Northern Ireland – going against the will of most British politicians. 

More importantly, Trump is boosting the US dollar with his trade wars. Initial negotiations between the US and Mexico have ended without an accord and both sides meet again today. Trump's verdict was that his southern neighbor's offers were "not enough" and that he may still slap tariffs as early as Monday. The president is also threatening China with fresh duties.

Apart from trade-related safe-haven flows, the greenback has also risen on the upbeat ISM Non-Manufacturing PMI that came out at 56.9 points after falling earlier on a disappointing ADP Non-Farm Payrolls increase of only 27K – the worst in over nine years.

With no significant events on the calendar, political developments remain in the limelight ahead of Friday's all-important US Non-Farm Payrolls. 

GBP/USD Technical Analysis

GBP/USD has been rejected at 1.2750 which was a high point in late May and has turned into a double top – a strong resistance line. Further resistance awaits at 1.2815 which was a swing high in mid-May and then by 1.2870 which was the low point in April.

Support awaits at 1.2670 which was the low point so far today. It is followed by 1.2640 which separated ranges earlier this week, by 1.2605, which held GBP/USD from extending its falls in late May, and by 1.2558 – the four-month low.

Indicators are mixed with muted upside momentum and a flat Relative Strength Index. The pair trades just below the 100 Simple Moving Average on the four-hour chart but above the 50-SMA.