GBP/USD Daily Forecast – Sterling Eases From Highs but Holds 1.2900 level

GBP/USD Volatility Set to Rise but can it Break Out?

As the UK elections near, there is a good chance that volatility will rise in British financial markets. But the question remains if GBP/USD will break out of its consolidation.

There is a pattern in the pound to dollar exchange rate in that it has been alternating between gains and losses for seven straight weeks now. This also means that the pair has been consolidating in a range for roughly the same time.

What most traders will be contemplating now is if the pair will break out of this consolidation either ahead or after the elections.

The poll results last week were somewhat mixed. On balance, the Conservative party’s lead of Labour narrowed. One poll showed a lead as small as 6 points which is the smallest since the snap election was called.

The poll most market participants were paying a lot of attention to last week was the YouGov MRP poll. The reason being that it correctly called 93% of the seats in the election two years ago.

The YouGov MRP poll showed a lead of 10 points which caused a bit of optimism, leading to a rise in GBP/USD. However, the rally stalled just ahead of resistance.

Technical Analysis

Range resistance in GBP/USD is best seen by drawing a trendline that connects the October high with the November high. Currently, this resistance is found near 1.2960. Last week, the pair stopped short at 1.2951.

The pair was under pressure in early day trading today but buyers seem to be protecting the 1.2900 handle thus far. It seems likely that some stops have now accumulated below 1.2880 and that is an area to watch out for in the early week.

To the upside, near-term resistance is seen in an area between 1.2940-1.2950.

The pair will likely become increasingly sensitive to poll data as we are now less than two weeks away from the election.

Bottom Line

• The rally in GBP/USD seems to have stalled out near 1.2950.
• The pair may struggle to gain at this stage, unless a catalyst is presented that warrants a range breakout.