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GBP/USD Daily Forecast – All Eyes on Weekend Vote

Jignesh Davda

PM Johnson Notches a Victory

UK Prime Minister Boris Johnson finally got a win as he managed to get EU officials to agree to his proposed Brexit deal. But Johnson now faces a bigger challenge in getting the deal ratified in parliament.

As the three main opposition parties have pledged to vote down the new deal, and since Johnson has lost his majority, the vote could go either way.

Parliament has scheduled a special meeting on Saturday to decide on how to proceed from here. The meeting will start at 08:30 GMT and it is expected to be a close vote.

Whichever way parliament decides on, a volatile price swing is expected when the market reopens next week. Considering that liquidity is usually thin at the open, there will likely be a big gap in the pound to dollar currency pair.

In yesterday’s forecast, I made a case that thought he pair could rally towards 1.2924 resistance, but some profit-taking is likely to take place. I still support this theory as the risk of holding exposure over the weekend is quite large and I do think traders will look to square up before the day ends.

The only thing that can alter that view is if there is some news later today that strongly supports the idea that Johnson has secured the vote. Johnson will be trying to convince Labour Party rebels to vote his way but so far there has not been any reason to confidently say he has enough votes.

Technical Analysis

For the past few days, I’ve been looking at a horizontal resistance level at 1.2942. Yesterday, GBP/USD reached it, and while overshooting it a bit, the level held it lower on an hourly basis.

GBPUSD Hourly Chart

My expectation is that we may see a bit of a pull back at this point. Again, I’m basing this on the fact that I don’t think traders will want to take on the risk of holding Sterling long over the weekend.

Bottom Line

  • Sterling might struggle to extend higher unless there is news that Johnson has secured the vote.
  • Resistance at 1.2924 is in play. The pair might correct from here as traders look to square positions ahead of the weekend.

This article was originally posted on FX Empire

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