- Sterling retreated back to 1.2900 level following John Bercow's resignation from the UK's House of Commons.
- Announcement of a new speaker, general election, and Brexit expected to determine long-term direction for Pound.
- 1.3015 (September's high) marks a strong resistance for Cable; strong support is located at 1.2840.
Following John Bercow’s resignation from the UK’s House of Commons, Sterling has been under pressure in the forex market while the investors wait for the Parliament to declare its new speaker. As per the sources, Lindsay Hoyle is currently leading the ballot while Dame Eleanor Laing is chasing him by a small margin.
GBP/USD Drops Back To Around 1.2900 Level
GBP/USD failed to sustain its gains above 1.30 level amidst the Brexit related uncertainty. With the proceedings of the UK’s parliament weighing down the Pound and U.S dollar being pushed higher due to the U.S – China trade optimism, the pair has retreated back to around 1.2900 level. According to the analysts, 1.2900 marks intermediate support for “Cable”. Despite GBP/USD’s failure to break below this level, experts have recommended caution as the pair is still expected to be vulnerable following the announcement of the new speaker.
The new president of the European Central Bank (ECB), Christine Lagarde is set to deliver a speech later today (18:30 GMT). Volatility is, therefore, expected to be higher for GBP/USD later today.
In the long run, analysts have opinionated that the general election set for December 12th is likely to be the next market mover for GBP/USD. Many have forecasted that the pair can be expected to trade sideways for this month with the general election giving a long-term direction to the pair.
1.3015 Marks Strong Resistance For Cable
On the upside, analysts have added, that 1.3015 level marks a strong resistance for Cable. Breaking above this level will see 1.3178 as the next immediate target. On the downside, below 1.29, 1.2842 is posing strong support for GBP/USD. Breaking below this support can open the way for a significant drop to as low as 1.2780 level.
The United Kingdom Construction Purchasing Managers Index (PMI) was announced earlier today at 09:30 GMT. Having met the analysts’ forecast, the news had minimal impact on the forex market. Data for services PMI is expected to be announced tomorrow.
All in all, while the economic news will continue to have a short-term or temporary impact on GBP/USD, the long-term outlook is likely to be reliant on the macroeconomics including the announcement of the new Speaker for the UK’s parliament, general election, and the eventual departure of the United Kingdom from the European Union.
On the other hand, Citi Group has recently suggested that the U.S dollar index is vulnerable to dropping as low as 85; an event that has the potential to give sufficient steam to GBP/USD to break above the crucial resistance at 1.3015 (September’s high).