GBP/USD Daily Forecast – Sterling Under Pressure on Brexit Uncertainties
Johnson Makes Another Push for an Election
UK Prime Minister Boris Johnson came close to finalizing a Brexit deal this past week. However, he lost a crucial vote to expedite proceedings which meant he was not able to get a deal done on time for the October 31 deadline.
He has since switched gears and is now pursuing a general election, under the assumption that the EU will grant an extension to the end of January.
EU officials may grant a short technical extension instead which would tend to renew optimism that Brexit will happen sometime soon. But a three-month extension accompanies all sorts of uncertainties.
Johnson wrote a letter to opposition leader Corbyn yesterday to discuss a potential election and on how things could play out from here. It certainly seemed like this letter was a warning to voters ahead of a potential election.
In the letter, Johnson highlighted the importance of getting Brexit done and that further delays would impact businesses and the economy in a negative way.
He went on to suggest that Corbyn would continuously delay Brexit even further if he wins the majority at a potential election. Corbyn is advocating for a referendum which allows UK citizens to vote on the proposed Brexit deal. To put something like this together could delay an exit by roughly a year.
UK parliament will vote on the call for a general election on Monday. The EU’s response to the extension request is crucial at this stage. Initially, they were expected to have an answer today. They might delay their response to Monday to see how the vote goes.
GBP/USD is showing signs of a turn in trend, or at least a correction. Bears have dominated since testing the psychological 1.3000 handle and the pair is on pace to snap a three-week winning streak.
On an hourly chart, the pair has fallen below a rising trend channel. This channel had contained the pair since the second week of the month. It is now trading within a downtrend channel.
Resistance at 1.29245 held the pair lower yesterday. I expect the pair will now attempt to test support from a horizontal level at 1.2738. The level should offer support as the 200-day moving average falls slightly below it to create a confluence.
GBP/USD is under pressure as investors await Monday’s vote and a decision from the EU on the previously requested extension.