GBP/USD Forecast: Traders go short as May goes for a short Brexit extension


  • GBP/USD is under pressure once again after consolidating.
  • UK PM May is set to ask for a short Brexit extension rather than a long one.
  • The technical picture is slightly less favorable.

GBP/USD is trading in the low 1.3200s, down on the day. UK PM Theresa May is reportedly asking for a short extension to Article 50, delaying Brexit by several months. According to the British media, she will try to pass her Brexit accord in Parliament once again, probably during the extra time.

Markets prefer a longer extension that will not alter the status quo and leave the door open to a second referendum and canceling Brexit altogether. The elections to the EU Parliament complicate matters. Citizens in the old continent will go to the polls on May 26th, but parties register by mid-April. This mid-April deadline will now have implications for Brexit. If the UK does not register to participate in the elections, it is moving towards the exit by the first gathering of the new EP in early July.

An extension is not fully guaranteed. Chief EU Brexit Negotiator Michel Barnier said that the UK must explain why it wants an extension. All 27 EU members need to approve such an extension. This may happen in the EU Summit on Thursday or wait for the last moment. As long as an extension is not approved, Brexit date remains March 29th, which is next Friday.

Brexit developments, news, and rumors are likely to rock the pound throughout the day with short breaks for events that are otherwise of high significance to GBP/USD.

The UK inflation report is set to show stability with headline inflation remaining at 1.8% YoY. There is some risk to the upside. See: UK inflation preview: Why GBP/USD risks are skewed to the upside

And later in the day, the Fed decision could have a more significant impact. The US central bank is set to leave its policy unchanged and add some substance to the pledge to remain patient on interest rates. The new dot-plot will likely be downgraded from the two rate increases the Fed forecast for 2019 back in December 2018.

See: 

GBP/USD Technical Analysis

GBP USD technical analysis March 20 2019

Cable is still trading above the 50 and 200 simple Moving Averages on the four-hour chart, but the 50 one is getting closer, approaching 1.3200. Moreover, upside Momentum has all but disappeared, and the Relative Strength Index is pointing down.

While the chart includes several spikes, our technical lines stick to the more stable levels.

1.3200 provided support last week and is also a round number. 1.3110 was a separator of ranges in early March. 1.3070 provided support around the same time. 1.3010 was a swing low last week, and 1.2960 is a solid support line as it is a double-bottom.1.3270 was a high point in early March. 1.3300 is a round number and held GBP/USD down last week. 1.3350 was a high point in late February, and 1.3388 was the cycle high.

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