GBP/USD fighting for 1.4000 amid geopolitical turmoil

The GBP/USD is currently trading at around 1.3950. The pound fell 50 pips in the early European session amid escalating tensions between the UK and Russia: Lavrov, the Russian foreign minister said that Britain's move was unacceptable and dangerous. He added that Russia will retaliate ‘soon’ and that he will ‘certainly’ expel UK diplomats.

The GBP/USD then retested the 1.3980 level as the Russian spy debacle became more international: the US, the UK, Germany, and France issued a joint statement poisoning  on the case in clear favor of the kingdom. Additionally, the US announced sanctions on Russian companies and individuals and in the US session, President Trump made a comment saying that the Russians were behind the murder attempt. As the Russian spy attempt of murder became more internationalized the GBP got some slack and is now stabilizing at around 1.3950 close to the 200 SMA (4-hour) at the time of writing.

Amid geopolitical chaos, a likely positive note for the Pound is that the EU granted the UK’s request to make independent trade deals while in the transition period which should last two years. Additionally, David Davis, the UK’s secretary for Brexit will meet the EU’s chief negotiator, Michel Barnier on Monday, March 19. 

Earlier today the US initial weekly claims declined by 4K to 226K while the US Philadelphia Fed manufacturing index declined to 22.3 in March, from 25.8 in February. The Empire Fed manufacturing index climbed to 22.5 in March vs 15.0 expected.

GBP/USD 4-hour chart

Technically, the Cable is still consolidating below a line in the sand,  the 1.4000 psychological level after forming an ABCD pattern. The 1.3950-1.3900 region is seen as supportive with the 100 and 200-period SMAs. If the bears are able to break with strength below the 1.3900 level, then 1.3800 is likely the next scaling point at the ‘C’ level, which was the lowest point of the last significant buy wave. On the flip side, if a GBP catalyst hit the market and 1.4000 is broken, the breakout is likely to be big as many stop orders are going to be triggered. The next scaling point to the upside becomes the 1.4100 and 1.4200 psychological levels.