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GBPUSD - Moves to Nine Month High above 1.32 Ahead of Pivotal Election



GBPUSD - Moves to Nine Month High above 1.32 Ahead of Pivotal Election
In the last week or so the GBPUSD has broken through the significant resistance level at 1.30 and moved to a nine month high just above 1.32. For the previous 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 which is now likely to offer support should the sterling decline.

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.

Throughout August the GBPUSD was able to consolidate and receive solid support off the 1.20 level, allowing it to stop the rot and take a breather from its drastic falls from earlier in the year when it was trading above 1.33. In late July, the GBPUSD fell heavily from 1.24, although it had been declining for several weeks after falling through the key 1.27 level. It was only at the end of June that the GBPUSD reached a one month high near 1.28 before its steady but strong decline in the time since.

Today British voters are heading to the polls yet again for the third time in four years, and financial markets have largely priced in a majority for Prime Minister Boris Johnson’s Conservative Party.  YouGov’s final poll has projected a 28-seat majority, however the poll’s range of possible outcomes stretches from 367 Tory seats to only 311. “Based on the model we cannot rule out a hung parliament,” Anthony Wells, YouGov’s director of political research, said.  The sterling has eased a little in the last 24 hours as some caution returned based on markets having largely priced in a clear Conservative victory.  A few weeks ago official data showed that the British economy had enjoyed third-quarter gross domestic product (GDP) at 0.3%, which allowed it to avoid a technical recession, having contracted by 0.2% in the 2nd quarter.  Disappointingly, on a year-on-year basis, third-quarter growth slowed to 1%, which was its slowest rate of expansion since 2010.Generally the figures have been considered disappointing.

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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.