Forex Update: GBP Victim of High Volatility Following Raft of Brexit Reports
- GBP had large movements in the European morning session, after several Brexit reports.
- GBP/USD resistance seen at 1.2835-50 range. Support noted at 1.2780, 1.2750 and 1.2710.
Early in the European session, there were reports coming from UK press, The Evening Standard, detailing that Brexit could be delayed beyond March 29th, citing cabinet ministers. Initially on this news hitting the wires, GBP spiked aggressively to the upside.
The logic behind That GBP jump is somewhat understandable, on the basis of hope that Britain could avoid leaving in March with a no-deal. This scenario could be very much catastrophic for the UK and its people. Every piece of trade the UK would need to do, the EU would have to slap on emergency tax, which would be extortionate to say the least. It would end up causing a drastic rise in costs for the entire country. Therefore, avoiding this would of course be viewed as a large GBP positive.
Not long after this initial news, a spokesperson officially for Prime Minister Theresa May denied that there will be a delay. GBP then cooled from those session high prints that were seen after the Evening Standard reports. Elsewhere, government sources later suggested they expect the EU to produce “assurances” on the Irish backstop on Monday. This has been a huge hurdle and a large part of the government division, on Theresa May’s initial deal with the EU.
GBP/USD Short-term Technical Review
The price managed to rally to a session high of 1.2850, before cooling south from these heights. Resistance can be seen running from 1.2835-50 range, where the bulls have faltered since 26th November 2018.
Furthermore, should the bulls manage to breakdown the above, a decent wave of buying pressure would likely be seen. As detailed above, given how long the mentioned resistance has held, an explosive move is very much probable upon a breach.
Keeping in mind the edging lower, support levels of note include 1.2780, 1.2750 and 1.2710, all hourly areas of comfort for GBP/USD. A breach of all mentioned could likely see intense selling pressure back down towards 1.2650.
The ongoing Brexit saga is expected to result in heavy volatility for GDP pairs. Traders are therefore advised to closely monitor the headlines.
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