GBP/USD retreating from confluence resistance ahead of UK Supreme Court ruling on Brexit

The greenback remained under intense selling pressure on Monday in wake of protectionist tone by the US President Donald Trump during his inaugural speech on Friday. Moreover, last week's speech by UK Prime Minister Theresa May continued to underpin the British Pound, with the GBP/USD major surging through 1.2500 psychological mark to touch the highest level since mid-December. Meanwhile, the EUR/USD pair also built on to its recent recovery move and jumped to over six week high.

Both the majors were seen consolidating Monday's strong gains, with slight negative bias, as markets now look forward to the UK Supreme Court ruling on whether Parliament approval is required to trigger Article 50. A win by the government would clear PM May's intension to officially begin the process of ending Britain's membership with the European Union by the end of March. Alternatively, a defeat might delay the process and trigger some volatility across GBP crosses. However, with May already confirming to put the final Brexit plan for a vote in both Houses of Parliament, the initial reaction could be short-lived and follow the established trend.

On the economic data front, the flash version of Euro-zone PMI prints for January are due for release during European session, while the US existing home sales data might provide some impetus later during NA session.

Technical outlook

GBP/USD

The pair is reversing from an important confluence resistance near 1.2540-45 region, comprising of 100-day SMA and 38.2% Fibonacci retracement level of 1.3445-1.1980 downslide. Hence, a subsequent weakness below 1.2465-60 immediate support is likely to accelerate the fall back towards 50-day SMA strong resistance, now turned support, near 1.2410 region. A convincing break back below 50-day SMA would negate the near-term bullish bias and drag the pair back towards 23.6% Fibonacci retracement level support near 1.2320-10 region, en-route 1.2250 strong horizontal support.

On the flip side, a clear break through 1.2540-45 confluence resistance now seems to pave way for continuation of the pair’s near-term upward trajectory, even beyond 1.2600 handle, towards 1.2650-55 intermediate resistance before eventually heading towards 50% Fibonacci retracement level resistance near 1.2700 round figure mark.

EUR/USD

With short-term technical indicators in bullish territory and a sustained trade above 38.2% Fibonacci retracement level of 1.1300-1.0340 downslide points to higher possibilities for continuation of the bullish trajectory. Hence, from current levels the pair seems more likely to head towards reclaiming 1.0800 round figure mark before aiming to test 50% Fibonacci retracement level resistance near 1.0820 level and 100-day SMA hurdle around 1.0840-45 region.

On the flip side, 38.2% Fibonacci retracement level near 1.0710-1.0700 region now becomes immediate support to defend. Failure to hold this immediate support, and a subsequent break below 1.0680-75 horizontal support could accelerate the slide towards 1.0625 intermediate support, en-route 50-day SMA support near 1.0590-85 region.