GBP/USD Forecast: New four-month lows as May plots her fourth attempt to pass Brexit

  • GBP/USD extends its descent amid ongoing political uncertainty.
  • UK PM May convenes her cabinet to plot a last attempt to pass her Brexit deal.
  • The four-hour chart shows the currency pair still suffers oversold conditions.

The saying "third time's a charm" did not apply to UK PM Theresa May's Brexit deal, but perhaps her fourth attempt may succeed. At least that is what she hopes, but chances are low and the pound remains depressed, hitting new four-month lows close to 1.2700. 

May convenes her cabinet today in an attempt to find a formula that will convince members of the opposition Labour party to support the deal. While cross-party talks collapsed last week, she is still trying to woo MPs from the opposite side of parliament to vote in favor.

And while she tries to break the ranks of the opposition, the divisions within her own party are exposed. Chancellor of the Exchequer Phillip Hammond has upped the ante by saying that a no deal Brexit would be a betrayal. Lord Michael Heseltine was suspended from his party after he said he would vote for the europhile Lib-Dems in the EU elections. 

On the other end of the party, the leading candidate to replace May, Boris Johnson, and former Brexit minister Dominic Raab, also a potential competitor, are open to leaving the EU without a deal. The ruling party faces a devastating outcome in the European Parliament elections, losing many votes to the Brexit party, which is set to win.

The ongoing political uncertainty and the fear of a eurosceptic such as Boris Johnson entering Downing Street weighs heavily on Sterling. In the longer term, Johnson may surprise, but this is not where we are now.

Outside Brexit-land, the US-Sino trade-related tensions have heightened as China remains defiant in the wake of America's ban on Huawei, the Chinese telecom giant. While the administration has granted a temporary license to the firm, many worry about a "tech cold war."

Moreover, the world's largest economies have not scheduled new high-level talks and pundits are already talking about a potential recession. Nevertheless, the Federal Reserve has not changed its stance and does not intend to cut interest rates. The US Dollar enjoys the safe-haven flows related to the tensions and the Fed's patient stance.

Overall, news from May's cabinet meeting and trade headlines are set to dominate a day that does not feature any top-tier economic releases. 

GBP/USD Technical Analysis

GBP/USD Technical Analysis May 21 2019

The Relative Strength Index on the four-hour chart is just below 30 at the time of writing, indicating oversold conditions. This situation implies a bounce. However, other indicators such as downside momentum and the falling Simple Moving Averages point to the downside. 

If GBP/USD loses this week's lows around 1.2710, the next support line is 1.2670 that was a swing low in January. Further down, 1.2610 was a stubborn support line in December. It is followed by the flash-crash low of 1.2440 in early January. 

Looking up, some resistance awaits at 1.2780 that held the currency pair down on Monday. On its way down, 1.2830 provided temporary support and now serves as resistance. It is followed by 1.2870 that was the low point in April.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Forex Analysis

Editors’ Picks

EUR/USD chops around amid end-of-month flows, ahead of Trump

EUR/USD is battling 1.11, close to the two-month highs amid choppy trading. Hopes for a fiscal boost in Europe and mixed satisfactory data have supported the currency pair. , Sino-American tensions are rising and investors await President Trump's China announcement.


GBP/USD advances amid US dollar weakness, shrugging off concerns

GBP/USD is trading above 1.23, edging higher amid US dollar weakness and Britain's gradual reopening. Intensifying Sino-American tensions and the Brexit impasse are ignored. 


Cryptocurrencies: $348M in matured derivatives boost the market

Futures and options contracts' expiration brings a wave of volatility to the crypto market. Ethereum takes advantage and attacks resistances in the market dominance chart, Bitcoin goes back. Ripple disappoints despite regaining the third place in market capitalization.

Read more

Canada's economy falls by 8.2% annualized in Q1, better than expected, USD/CAD shakes

The Canadian economy squeezed by an annualized rate of 8.2% in the first quarter of 2020, better than -10% expected. Quarterly, Gross Domestic Product (GDP) squeezed by 2.1%. Most of the downfall occurred in March, with a drop of 7.2%, better than 8.5% projected. 

Read more

WTI drops 4% and eyes $32 mark amid risk-off, weakening demand

The selling pressure around WTI (July futures on Nymex) accelerates following the break below the 33 level, as bears now target the 32 support zone heading into the key US macro data and US President Donald Trump’s response to the Hong Kong issue.

Oil News

Forex Majors