GBP/USD preparing to take another run at 1.40, but Brexit continues to weigh

GBP/USD regains footing as Dollar recedes.
Brexit in-fighting continues to erode Sterling potential.

Joshua Gibson FXStreet

GBP/USD regained its footing in Thursday trading and is moving flat near 1.3950 heading into Europe markets.

The Sterling was able to halt its recent decline and claw back, albeit with limited conviction. The bullish potential in the pair is being provided by a pullback in Dollar buying with the USD being sent lower following a decline in bond yields as risk appetite returned to the markets yesterday.

GBP/USD is being weakened from within thanks to a recent decline in household spending, adding credence to recent fears that inflation has already begun eating away at consumer's ability to spend, as well as continued infighting with the UK's parliament as Prime Minister Theresa May's ruling Conservative party fractures over Brexit concerns.

PM May's recent reversal on a key Brexit policy regarding residency for EU citizens following Brexit is drawing ire from hard-line Brexiteers within May's party, who feel that continued backpedaling by May in the face of warnings and threats from EU leaders in Brussels represents a capitulation over UK sovereignty. Local elections begin in early May and promise to further split party lines within the already-minority government.

GBP/USD Technicals

The pair is still holding in positive territory, and if the bulls can maintain control, then yesterday's rejection of the 34 EMA at 1.3887 could provide support for a move further up; bearish signals have begun to strengthen, however, and last week's turn down from 1.4144 has priced in a lwoer high for the pair. Support is priced in between 1.3856 and 1.3797, with resistance building at the 1.4000 level.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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