GBP/USD Daily Forecast – Sterling Struggles to Hold Early Day GainGBP/USD has come under pressure in early trading on Wednesday as the dollar index makes another attempt to break above range resistance.
UK Parliament Debates Exit Bill
The House of Commons is in the process of debating Johnson’s exit agreement with the EU and the PM’s deal is expected to turn into British law by the end of the week.
The opposition has brought forward several amendments but with Johnson now holding a majority, the process should be fairly straight forward. Johnson has vowed to take the UK out of the EU and this brings him one step closer to delivering on his promise.
The markets were volatile during the Asian session after reports of a missile strike on US forces by Iran. Gold prices rallied to seven-year highs while the Japanese yen and Swiss franc rallied on their safe-haven status. However, much of the gains have reversed since then. US President Trump is expected to comment on the situation later in the day.
The dollar has been dominating since the start of the European session and the trade-weighted index (DXY) is nearing range resistance.
DXY has been trading within a range since the last week of December and is testing the upper bound of the range for the fourth time. A bullish break will tend to weigh on the majors, and is likely to drive GBP/USD lower.
The pound to dollar exchange rate has come under pressure since the European open and has printed an hourly bearish engulfing candle that has wiped out an early day recovery.
However, the pair is holding above a rising trendline that originates from a low posted Friday. In addition to the trendline, the 200 moving average on an hourly chart is in play. This indicator has held the pair higher since Friday.
GBP/USD has been hinting of a turn lower after a failed break above 1.3200 last week. A break below the mentioned trendline would offer bearish confirmation with a potential target of 1.3000.
To the upside, resistance for the session ahead is found at 1.3139. It will likely take a bullish break above 1.3189 to get bulls excited.
- GBP/USD is trading heavy in the early day but held higher but a rising trendline.
- The dollar is threatening a bullish range break. If the index manages to break higher, the exchange rate is likely to see an increase in bearish pressure.