GBP/USD Daily Forecast – Sterling Retreats to Important Support

British Lawmakers Return to Parliament

Lawmakers are set to return to parliament today after the UK Supreme Court ruled on Tuesday that Boris Johnson’s suspension was unlawful.

The British Prime Minister has been dealt a series of defeats in his attempts to deliver an EU exit for the United Kingdom. So far, Sterling has rallied as the markets viewed his defeats as lessening the chances of a no deal exit.

However, GBP/USD only rose marginally after yesterday’s court ruling and has given up the gain in early trading on Wednesday. The pair is now at a technical inflection point, and a break lower would suggest that a price reversal is taking place.

GBP/USD printed lows near the start of the month below 1.2000 and rallied to a high just above 1.2500 late last week.

Parliament will reconvene at 10:30 GMT today and this might lead to some heightened volatility in the British pound exchange rates. So far, there has been a push for Johnson’s resignation by Labour Party leader Jeremy Corbyn. However, the PM has made it clear that he does not intend to resign and Corbyn does not want to press the issue until he can ensure the risk of a no-deal is off the table.

Technical Analysis

GBP/USD has reversed Tuesday’s rally after turning from resistance at 1.2486. The pair has returned to support from a rising trend channel. This same channel held the pair higher ahead of the Supreme Court decision yesterday.

A channel break would suggest the pair has reversed after a struggle to break above notable resistance since the middle of the month.

The overhead resistance in play here is the 20-week and 100-day moving averages. As well, the 1.2500 level which carries psychological properties.

A drop below this week’s low at 1.2421 can provide additional confirmation of a technical break. The first level of support comes in at 1.2373. This level had previously acted as major resistance in the second week of the month.

Bottom Line

• GBP/USD is on the verge of a technical break lower.
• Parliament reconvenes today which might trigger heightened volatility.
• Support for the session ahead resides at 1.2373.