GBP/USD Daily Forecast – Pound Sold Ahead of Announcement of New Leader

The British pound is trying to post a third consecutive day of losses against the greenback. The pair has been weighed by a stronger dollar and ongoing Brexit concerns
Jignesh Davda

Borish Johnson Likely to be Declared UK’s new Prime Minister

The vote is in and it is largely expected that Johnson will be the newly elected leader of Britain’s governing conservative party. An announcement should be made today, likely ahead of the New York open.

The distinct difference between Johnson and soon to be former PM Theresa May is their approach to Brexit. Specifically, Johnson has pledged an EU exit, no matter what it takes.

This means a no-deal Brexit is on the table. That is if an agreement is not reached by Halloween. The markets have reacted by selling off Sterling, and as a result, the British pound remains the weakest major currency in July thus far.

Another driver for further weakness in GBP/USD is a stronger dollar. The trade-weighted dollar index (DXY) is set to post a third day of gains and is near a two-week high.

With the end of the month nearing, the monthly chart for DXY has come into focus. Currently, a horizontal level at 97.60 has held the index lower since the first approach back in late 2018. DXY is not too far away from the level and looks poised to post a bullish engulfing candle on a monthly chart.

Technical Analysis

GBP/USD was briefly held higher by support near 1.2453 yesterday. However, sellers stepped in on a rally to the 1.2500 handle. Since then, there has been fairly strong downside pressure.

GBPUSD 4-Hour Chart

The next area of interest to the downside falls at 1.2400. I’ve marked a horizontal level at 1.2406 which reflects the lowest daily close in July thus far.

Beyond that, I think there is some potential for a retest of this year’s spike low at 1.2370. To the upside, I see resistance at 1.2453 for the session ahead. This level had held the pair higher on a dip in the first half of the month.

Bottom Line

  • UK’s new PM will be announced. This will most likely happen ahead of the North American open.
  • GBP/USD remains under pressure, 1.2400 is the next area to focus on to the downside
  • Upside resistance is seen at 1.2453. I think the level will hold sellers in today’s session, if we get there.
Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.