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

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

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.