GBPUSD Heading Lower, Ignores PM May's Reprieve
Sterling (GBP) and Brexit Talking Points:
- UK PM Theresa May survives for now but the financial market remains unconvinced.
- GBPUSD now eyeing sub-1.2800.
The DailyFX Q4GBP Forecast is available to download.
GBPUSD – Further Downside Seen Ahead
UK PM Theresa May survived a meeting of 1922 Committee on Wednesday evening and continues in her role as Prime Minister for now. There was no confidence vote yesterday but reports continue to point to over 40 votes of no confidence waiting in the wings - 48 are required to trigger a leadership contest. UK PM is still not out of the woods and a leadership challenge/vote of no confidence could occur at any time.
Sterling continues to price in a negative Brexit scenario as the contentious issue of the Irish border dominates talks. With no solution found so far – or suggested solutions unacceptable to either side – negative sentiment will continue to cap any upside move in Sterling and put pressure on support levels. The suggested emergency EU Summit in November has been put on the back-burner and the December 13-14 meeting looms large if a deal is to done in time to be ratified.
GBPUSD is currently capped by previous support built on the October 3-4 double low at 1.29220 and is set to test the September 5 swing-low at 1.27856. The pair trade below all three moving averages and the outlook remains negative. Cable is also battling a strong US dollar – the dollar index made a two-month high Wednesday - which shows no signs of weakness ahead of the US mid-term elections on November 6.
GBPUSD Daily Price Chart (May – October 25, 2018)
IG Client Sentiment data show that retail traders are 71.9% net-long GBPUSD, a bearish contrarian set-up. However, recent daily and weekly positional shifts give us a stronger bearish trading bias.
Traders may also be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.
--- Written by Nick Cawley, Analyst
To contact Nick, email him at email@example.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.