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GBPUSD - Enjoys Strong Support from 1.30 as Brexit Given Green Light



GBPUSD - Enjoys Strong Support from 1.30 as Brexit Given Green Light
In the last week or so the GBPUSD has eased away from a two week high above 1.32 back down to the key support level of 1.30 where it is currently enjoying more support. It has shown some more volatility of late when it surged higher to its highest level in more than 18 months above 1.35 before falling sharply back down to the current key level of 1.30 which has been significant for the last three months.

The 1.30 level again remains key and will be closely watched to see if the support holds up or the sterling returns back below and meets resistance at that level again. In early December, the GBPUSD broke through the resistance level at 1.30 and moved to a nine month high just above 1.32, before the surge higher to above 1.35.

For the prior six weeks or so the GBPUSD had traded in a narrow range consolidating under resistance at 1.30, which has become a level of significance, and as expected is now offering support now that the sterling has declined. Earlier in the range, the GBPUSD eased ever so slightly from a five month high just above 1.30 after smashing through the key 1.25 level which has resisted prices strongly for around a month. It had also received some support from 1.28 during this period of consolidation.

The 1.25 and 1.28 levels may play roles again should the sterling decline from its current highs. Prior to the surge higher to above 1.30, it had settled right around the 1.23 level after falling away from the key 1.25 level, where it met stiff resistance for nearly two weeks. Just prior to the resistance at 1.25, the GBPUSD enjoyed a strong surge higher to a one month high above 1.25, but was sold down strongly at anything above that level.

In what seems one of the great political sagas in recent history, British lawmakers finally voted overwhelmingly in favour - 330 voted for and 231 against - of British Prime Minister Boris Johnson's Brexit deal, providing the pathway for the United Kingdom to leave the European Union later this month.  This will be approximately 10 months after it was originally scheduled to.  PM Johnson's plan is essentially the same as former PM Theresa May's, however he has replaced her Northern Irish backstop with a customs border in the Irish Sea between Northern Ireland and the rest of the United Kingdom.  Assuming it is also approved by the European Union, the United Kingdom will enter a transition period until 31st December 2020, and during this time the UK and EU will negotiate a free trade deal, as the UK's trading relationship with the EU will remain the same.  The Bank of England (BOE) has stated that it will be closely watching how the result of the election impacts sentiment and the economy.It is accepted that if there is a Brexit deal done by the 31st January, the central bank will keep rates at 0.75% for the time being.

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The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.