GBP/USD Technical Analysis: Holding onto the Trend
After the price collapsed to the 1.2822 support at the end of last week's trading, the pair returned with gains that reached the 1.2911 resistance at the beginning of this week, before settling around 1.2895 at the time of writing. The pound is still supported against the other major currencies as poll data confirm that the Conservative Party is still on track to secure a majority in the country's general election on Dec. 12. The latest polls suggest that the Conservatives could win a total of 349 seats, and the main opposition Labor Party could win 200 seats in the next House of Commons, making it easier for Boris Johnson to pass the Brexit agreement he signed with the EU, whose rejection was a key reason for the early election in the country.
It should be beared in mind that a “hung parliament” in which no party has a majority will be extremely negative for the pound, as it will call for many months of uncertainty that are likely to complicate trade investment and lead to further UK economic slowdown, which may lead to possible interest rate cuts by the Bank of England in 2020. Currencies tend to fall when the central bank starts issuing interest rate cuts, and therefore expect to see a strong sterling decline in 2020 if this happens.
Boris Johnson delivered the Conservative statement and seems to have avoided the lessons of 2017. The statement did not come up with any new and exciting policies, and the aim is to provide something that does not detract from the central mission of the campaign, "ending Brexit." The more conservatives falter, the better their chance of securing a majority. By contrast, the Labor Party did the exact opposite, by making a statement that certainly seems drastic because of promises to raise taxes and significantly increase spending.
According to the technical analysis of the pair: Continued opinion polls in support of the Conservatives victory will continue to support the GBP/USD in the upward trend, which culminates at the 1.3000 psychological resistance, breaching that level will support the move towards new record resistance levels. On the downside, a pull back below 1.2800 will strengthen the bearish momentum and confirm the current uptrend. The future of Brexit is still at stake and depends on the outcome of the upcoming British elections and the US-China trade deal, both of which are the most influential factors on the pair's direction.
As for the economic calendar data today: From the UK Mortgage Approvals will be released. From the US, Consumer Confidence, Richmond Industrial Index and Commodity Trade Balance data will be released.
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