GBP/USD refrains from crossing 21-day EMA amid UK cabinet overhaul

With the pro-Brexiteers holding key UK positions under the new PM, GBP/USD refrains from extending previous gains while declining to 1.2475 ahead of the London open on Thursday.

Boris Johnson overhauled the British Cabinet on the first day of his role as a Prime Minister (PM) and the key characteristic marked in leading position holders is their support for a hard Brexit.

In the new Cabinet, Jacob Rees Mogg will be the leader of the House of Commons whereas Sajid Javid will occupy the position of Chancellor. Further, Dominic Raab and Priti Patel will mark a comeback as the Foreign Secretary and the Home Secretary respectively.

PM Johnson also reiterated his pledge to leave the EU by October 31 with "no ifs, no buts", which in-turn highlights the risk of a no-deal Brexit should the regional leaders avoid changing previous conditions. On the other hand, the EU officials exerted pressure on the UK PM in their curt letter of congratulations to define the Brexit plan in detail.

At the US, markets keep expecting the Federal Reserve to announce 50 basis points (bps) cut during next week’s meeting while giving less importance to positive developments surrounding the US-China trade.

Investors may now seek further clues as to how the new British PM moves forward in his duties while also concentrating on the US Durable Goods Orders and the UK CBI Distributive Trades Survey details. While the US data is expected to recover to 0.7% from -1.3% in June, the UK statistics could soften previous plunge of -42% to -10%.

Technical Analysis

Unless breaking 1.2440/30 support-zone including July 09 low and support-line of the short-term symmetrical triangle, the pair isn’t expected to revisit 1.2382, which in turn highlights the importance of 1.2505 and 1.2540 as immediate resistance.