GBP/USD Forecast: Tumbling below uptrend support as Boris Johnson has one foot in Downing Street

Boris Johnson has one foot in 10 Downing Street says the headline in the Daily Mail – and the usually sensational media outlet cannot be accused of exaggerating this time. The former foreign minister overwhelmed his rivals by receiving 114 votes of his fellow MPs in the first round of the leadership vote – far above Jeremy Hunt, Michael Gove, Dominic Raab, and others.

Three candidates were eliminated and MPs that voted for them may now add to Johnson's support. The next round is held on Tuesday. Even if Johnson receives no additional support but only holds onto his current backers – his place among the shortlist of two candidates that will face the membership is secure. And among party members, Johnson enjoys the support of 54% of members according to Conservative Home.

Johnson said the UK must leave the EU by the October 31st deadline – with or without a deal – raising the risk of a no-deal exit. On the other hand, he does aim to reach a new accord. Markets are trying to assess his future policies. 

Bank of England Governor Mark Carney will speak later on and may touch on Brexit. The bank assumes a "smooth exit" and the governor may warn of the risks of an exit which is not smooth. When it comes to moving the pound, the BOE has played second fiddle to political developments of late.

US trade wars, critical data

This is not the case in the US – where trade wars and Fed speculation compete in moving the US dollar. The White House has repeated its threat to slap China with tariffs if Presidents Donald Trump and Xi Jinping do not hold a meeting at the sidelines of the G-20 meetings at the end of the month. Washington says it is moving in the direction of such a summit. 

Speculation about the Fed's next move is mounting and the final top-tier indicator is due today. Economists expect US retail sales to rise in May – both on the headline and in the all-important control group. Consumption is central to the US economy. 

See US Retail Sales Preview: Return to spender

The last economic indicator for the week is directly related – consumer confidence. The University of Michigan's preliminary survey for June is expected to tick down but remain close to the highs.

See US Michigan Consumer Sentiment Preview: Happiness and caution

Overall, political events and US data stand out today.

GBP/USD Technical Analysis

GBP/USD has dropped below the uptrend support line that has accompanied it in the past ten days. The fall is convincing and Sterling is already breaching the next support line at 1.2640. 

Further down, 1.2610 was a low point in early June. The next downside target is 1.2558 – May's bottom and the lowest since January. 

Momentum remains to the downside, the Relative Strength Index is leaning lower. Moreover, GBP/USD has lost the 100 Simple Moving Average after losing the 50 SMA earlier in the week.

Initial resistance awaits at 1.2680 which provided support on Thursday. Further up, 1.2705 was a high point on Thursday and provides further resistance. The most considerable cap is at 1.2765 which held the pair down twice in recent weeks – a double top.