GBP/USD Daily Forecast – Sterling Consolidates Below Critical Resistance

Supreme Court Ruling Could Trigger a Break in GBP/USD

A two-day hearing in Britain’s Supreme Court will determine if UK Prime Minister Boris Johnson acted unlawfully when he suspended parliament earlier this month.

Today is the final day of the legal proceeding and a verdict could be delivered as early as today. If Johnson is defeated, he will need to recall parliament.

Johnson requested the suspension in order to pass a new legislative agenda but is being accused of proroguing parliament to prevent interference in his Brexit plans.

The main obstacle to reaching an exit deal is the backstop on the Irish border which EU officials refuse to budge on.

Brexit minister Stephen Barclay commented earlier today that the UK might just have to leave without a deal come October 31. He reasoned that the UK has now unsuccessfully tried three times to remove the backstop and doesn’t think the two parties will come to an agreement on this point.

Technical Analysis

Since the surge higher on Friday, GBP/USD has consolidated below an important resistance confluence.

The main part of this resistance area is the 1.2500 level which carries psychological importance. In addition to it, the 20-week and 100-day moving averages are also in play.

While the overhead resistance signals the potential for a reversal, GBP/USD has shown strong upward momentum in the rally that began near the start of the month. Dips in the pair have been shallow as the markets continue to perceive the odds of a no-deal Brexit less than they were in August.

For the session ahead, a rising trendline has been holding the pair higher and is in play. The trendline originates from a low posted in the early week. Further support resides at 1.2460. I suspect that if the pair falls below both these areas of support, it might signal a reversal.

At this stage, I expect that stops have accumulated above 1.2500. In the event the pair breaks higher, it might accompany a quick move to the 1.2600 level.

Bottom Line

• GBP/USD has fallen into a range below an important resistance confluence.
• A ruling from the UK Supreme court may come in as early as today. I expect this will be the next catalyst for volatility in the pair.