GBP/USD Forecast: Getting out of oversold conditions probably to fall again

A bold plan is what UK PM Theresa May will offer members of parliament in a last-ditch attempt to get the UK out of the EU and secure her legacy. After her backbenchers showed her the door last week, she promised to unveil a new offer related to the Brexit bill.

GBP/USD is giving her the benefit of the doubt, by not extending its falls and slightly recovering. However, it may be a "dead cat bounce" move as it is hard to see how MPs will support any accord, especially led by a government which is in its last days. 

The leading candidate to replace her is former foreign minister Boris Johnson, which is a staunch supporter of Brexit. He threw his hat into the ring and the pound did not like it. However, Johnson may surprise and the pound may not necessarily suffer. Such an outcome may take time though. 

Both her Conservative Party and the opposition Labour with whom talks broke down last week are facing a significant defeat in the European elections this week. The specter of the poll was supposed to push parliament to support the accord, but such a move may wait for after the results are in.

Broader markets remain worried about the ongoing trade war between the US and China. Google and other US firms are complying with the US blacklisting of China's Huawei. The decision exacerbates the mood which was already damp after the world's largest economies had announced new tariffs on each other.

The economic calendar is light today with only the Conference Board's leading index and a speech by Fed Vice Chair Richard Clarida on the docket.

GBP/USD Technical Analysis

The Relative Strength Index on the four-hour chart is climbing above 30, getting out of oversold conditions. The move implies that GBP/USD may resume its falls as momentum remains down and the currency pair is trading below the 50, 100, and 200 Simple Moving Averages. 

Initial support is at the fresh low of 1.2711, the lowest since January. The next cushion is at 1.2670, which was a swing low back then. Further down, we find 1.2610 which was a support line in December 2018.

Initial resistance awaits at 1.2775 that was a low point in February. It is followed by 1.2830 that provided temporary relief last week. April's low of 1.2870 is next.