- GBP/USD has kicked off the week with a mild drop after messy weekend developments.
- Events in parliament are set to rock sterling, which has reasons to rise.
- Monday's four-hour chart is showing a bullish uptrend support line.
With Yellowhammer, three letters to the EU and a meaningless vote on Super Saturday – it is no wonder that there is profound confusion over Brexit. However, the weekend's developments are mostly positive.
Parliament forced Prime Minister Boris Johnson to ask for an extension to Brexit. While he stressed he does not want one and refused to sign the letter, the EU is considering it. The all-but-certain avoidance of a no-deal Brexit is good news for the pound.
Positive Brexit developments
The bloc is unlikely to respond immediately but rather wait for developments in parliament. After the government pulled the Meaningful Vote (MV) on Saturday following the Letwin amendment, it may be unable to introduce it once again. House Speaker John Bercow is set to disallow another debate and the government will move to introduce the more-detailed legislation 0 the Withdrawl Act Bill (WAB).
That will probably take place on Tuesday and according to various number crunchers – Johnson is on the verge of mustering a majority for the deal. That is also good news for markets that want more certainty. In case parliament rushes through the deal, the EU will not grant an extension and the UK will leave the EU on October 31. Certainty is good news for sterling.
Another pound positive development comes from the benches of the opposition once again. Labour is seeking new alliances, including with the Northern Irish Democratic Unionist Party (DUP).
Amendments to the WAB may include a customs union – practically voiding the deal which leaves Great Britain out of the EU's arrangements. The DUP rejects Johnson's deal due to the separation between Northern Ireland and the rest of the UK. In that case, both the government and the opposition may decide elections are necessary to break the deadlock and Brussels is set to allow time for it.
Another amendment is conditioning support for Johnson's deal on a confirmatory vote – a second referendum. In that case, no-deal will be 100% removed and the option to remain – what markets desire – will become a viable option once again.
All in all, the chances of a no-deal Brexit are falling and the chances of either Johnson's deal or Remain are rising.
For more detail, see Three positive Brexit developments
Beyond Brexit
The US Dollar remains on the back foot after weak Retail Sales data last week and rising prospects for the Federal Reserve to cut rates next week. A light economic calendar means the focus remains on the next political moves. Moreover, Brexit has a growing impact on other currencies, overshadowing other market developments.
The technical chart is also favorable.
GBP/USD Technical Analysis
GBP/USD has been trading alongside a steep uptrend support line since mid-October, and the recent falls have only strengthened it. The Relative Strength Index has dropped below 70 – thus exiting overbought conditions. The pair trades above the 50, 100, and 200 Simple Moving Averages on the four-hour chart and momentum remains positive.
Initial resistance awaits at 1.2945, which is the daily high. It is followed by Thursday's peak of 1.2989 – a five-month high. Next, we find lines dating back to the spring. These include 1.3045, 1.3080, and 1.3135.
Support awaits at 1.2895, which was a temporary peak on the way up, then by 1.2800, which had the same role, and 1.2750, a support line last week. 1.2705 and 1.2655 are next.
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800, as traders lack directional impetus amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days.
US core PCE inflation set to ease in February on month as Federal Reserve rate cut bets for June mount
The core Personal Consumption Expenditures Price Index is set to rise 0.3% MoM and 2.8% YoY in February. The revised Summary of Projections showed that policymakers upwardly revised end-2024 core PCE forecast to 2.6% from 2.4%.