GBP/USD Daily Forecast – Johnson to Put Forth New Brexit Plan

Johnson Takes a Decisive Step Forward

There’s been a lot of back and forth over the past few months but the consensus has been that there hasn’t been a lot of progress for the UK, in securing a deal to leave the EU.

The main issue is the Irish backstop and several EU officials have commented in the past that Johnson is yet to put forward a way to get around the impasse. Well, the British PM intends to do exactly that with a proposal that he will put forward today.

While his proposal is not likely to be met with immediate approval, if it is at all approved, this appears to be the biggest step towards securing a deal in recent times.

Johnson continues to state that the UK will leave by October 31, even without a deal. He once again takes the same stance with this proposal although it is not clear how that will happen. British lawmakers passed a law recently that prevents an EU exit without a deal. The only ‘loophole’ there is if parliament approves a no-deal exit which appears unlikely.

Technical Analysis

After a period of consolidation, GBP/USD has dropped below an important support confluence. This confluence consists of the 200 moving average on a 4-hour chart and a horizontal level at 1.2287.

There is still a bit of support at this point from the 50-day moving average which comes in at 1.2250. How the pair closes at the end of the day will be important as its currently hovering around the indicator.

Support for the session ahead is found at 1.2178 as the level was well-respected as both support and resistance in August. Resistance is now at the broken support level of 1.2287.

Johnson’s proposal could accompany a volatile reaction in the pair. If the pair breaks above 1.2350 in the session ahead, I suspect a broader recovery might be playing out which could lead to a retest of important resistance around 1.2500.

Bottom Line

• PM Johnson will put forth a proposal that includes a way to settle the argument over the Irish backstop.
• A rise in volatility appears likely as a result of this proposal.