GBP/USD Forecast: Oversold as May may be over and out soon

GBP/USD is trading at the lowest levels in three months amid trade and Brexit issues.
PM Theresa May's future is at the hands of the Conservatives' 1922 Committee.
The four-hour chart shows clear oversold conditions for the currency pair.

Yohay Elam FXStreet

UK PM Theresa May is getting closer to losing her job at 10 Downing Street. The embattled politician faces the backbencher 1922 Committee of her Conservative Party, and they want to know when she plans to step down.

The growing opposition from within comes after the government officially announced it would bring the Brexit accord to a fourth vote in the first week of June. It is unlikely to pass. Also, the Conservative Party is set to suffer substantial losses in the European Parliament Elections on May 26th.

If May is ousted, her successor may be a proponent of Brexit such as former foreign minister Boris Johnson or former Brexit secretary Dominic Raab. They may lead the UK out of the EU in a disorderly fashion. Political uncertainty and the growing chances of a hard Brexit weigh on the pound.

And while May may lose her job, there are fewer unemployed Brits. The unemployment rate dropped to 3.8% in March while wage growth moderated to 3.2%. The data, released on Wednesday, had little impact, as politics dominate.

And it is not only British politics that have an impact. US President Donald Trump stepped up the pressure on China by declaring a national emergency on technologies from adversaries, or in other words: curbing Huawei, the Chinese telecommunications giant. The move is another aggravation in the trade war, which is not nearing a resolution. The risk-off market mood pushes the safe-haven USD higher.

A relatively light calendar leaves all the attention to May's future and Trump's next move in the trade war.

GBP/USD Technical Analysis

pound dollar May 16 2019 technical chart

The Relative Strength Index on the four-hour chart is below 30, implying oversold conditions and implying a bounce. All the other indicators are pointing to further losses, as 50 Simple Moving Average crosses the 200 to the downside, the "death cross" pattern. Momentum is leaning lower as well.

GBP/USD is battling the 1.2830, which was a swing low in February. Another trough from that month, 1.2775, is a critical support line. Below, the next level to watch is 1.2670 that provided support in January.

Resistance awaits at 1.2870, which was the low point in April. 1.2895 and 1.2925 were the limits of a range the pair traded in last week. 1.2970 and 1.2990 are next up.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

AUD/USD rises to 0.6950 as USD slips on Fed's Warsh

AUD/USD regains traction and extends the bounce toward 0.6950 in the Asian session on Friday. Fed Chair Warsh's comments reinforce the selling pressure on the US Dollar, allowing the pair to stretch higher. Warsh said that he remains committed to delivering price stability without giving away anything on future interest rate path.

USD/JPY falls in symc with USD, gives up 158.00 after Warsh's speech

USD/JPY has come under fresh selling pressure and gives up 158.00 in the Asian session on Friday amid the emergence of fresh US Dollar selling. Fed Chair Warsh's non-committal commentary on the future tightening path, weighs on the US Dollar and the pair.

Gold looks vacillating above $4,150

Gold alternates gains with losses below the key $4,200 mark per troy ounce on Friday. The yellow metal’s irresolute price action comes in response to a modest pullback in the US Dollar and a tepid recovery in US Treasury yields across the board.

Bitcoin steadies at $82,000: The five forces crushing the Uptober rally

Crypto markets have remained under pressure so far in October, with Bitcoin (BTC) sliding below $80,000 earlier this week before recovering to around $82,000 on Friday, as macroeconomic headwinds and cooling demand weigh on the market.

The Fed just got a second hot inflation number. Here's what the diesel signal is really saying

The Federal Reserve (Fed) faces a renewed inflation challenge after two consecutive reports showed price pressure intensifying across the US economy. September's Consumer Price Index (CPI) confirmed accelerating consumer inflation, while the Producer Price Index (PPI) revealed an even sharper rise in business costs. Behind both reports lies a common factor: energy prices.

Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff

Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.