GBP / USD. May is preparing to "go to Brussels"

The pound against the dollar gradually slips from the level of the annual maximum (1.3216) to the base of the 30th figure. And although the southern dynamics is cautious in nature, the tension among traders is increasing day by day, given the rhetoric of top European countries regarding the prospects for Brexit. It is noteworthy that the market is cautious about both long GBP / USD positions and short ones, especially against the background of Theresa May's upcoming speech, which is due tomorrow.


In general, the situation is still uncertain. The leaders of the European countries express in turn a joint position, the essence of which boils down to the fact that the EU will not reconsider the already agreed deal "in favor of the British Parliament." German Chancellor Angela Merkel reiterated this today, exerting background pressure on the pound. However, the British currency is declining reluctantly. Firstly, the negative reaction of Brussels was predictable, and secondly, representatives of the European Union still leave loopholes for the resumption of negotiations. Although at the moment such intentions are read "between the lines."

Even the German Chancellor, rejecting the possibility of a review of the deal, added that the question of backstop could still be considered, albeit in the context of the future relationship between London and Brussels. In other words, Europe, on the one hand, does not want to change the text of the agreement, but at the same time admits the possibility of concluding additional agreements. The sluggish pound decline suggests that the majority of traders still do not believe in the implementation of the "hard" scenario (otherwise a pair of GBP / USD would be in the area of 26-26 figures) but at the same time they are afraid that, overestimated her strength, going "on the offensive" on Brussels.

Meanwhile, the British prime minister is filled with optimism. At the weekend, in an interview with one of the British publications, she announced that she plans to obtain guarantees from the European Union about the absence of the border between Ireland and Northern Ireland. To this end, it will soon go to Berlin, and then to Brussels, to change the already approved EU deal. She is really quite militantly tuned: "I will fight for Britain and Northern Ireland, I will be armed with a new mandate, new ideas, and determination," May told reporters.

Apparently, tomorrow's speech of the prime minister will be devoted to the upcoming "crusade", the outcome of which will depend on the outcome of the deal. Today, a spokeswoman for Theresa May, announcing this event, recalled that the prime minister strongly opposes the holding of early elections and the cancellation of Brexit (as well as his transfer). It is obvious that in the course of her speech she will repeat these theses, making a double impression on traders. On the one hand, such a position increases the risk of a chaotic scenario - if Brussels does not show flexibility, the House of Commons will not approve the agreement accordingly (and the deputies refused to renew the 50th article of the Treaty of Lisbon). But the flip side of the coin is that there is still a version of a compromise with Brussels, in one form or another.


After all, everyone understands that the European Union, a priori, could not respond positively to the decision of the British parliament, adopting Theresa May "with open arms." Now, there is again a political game, in fact, a game of nerves, at stake which are the conditions for future relations between the Alliance and Britain. There are many unknowns in this complex equation, although the desired result of each of the parties is known in advance. In my opinion, Brussels ultimately agrees to make cosmetic changes to the agreement by concluding additional memorandums but this will be done at the last moment so that British deputies do not wake up their appetite in the context of additional requirements.

Thus, the GBP / USD pair is unlikely to keep the 30th figure. Amid difficult negotiations, the "Briton" will drop in price at least to 1.2960 (the average line of the Bollinger Bands indicator on the daily chart). If the bears break through this support level, a larger rollback will follow: in this case, the price will drop to 1.2825 (the upper limit of the Kumo cloud on D1). But the resistance level is the price of 1.3216, this is the annual maximum, which coincides with the upper line of the Bollinger Bands on the same timeframe.

In general, talking about any priority of the south or north on a pair of GBP / USD is impossible. During the negotiation process, the mood of the traders will change rapidly. In just a few hours, the situation with the pair can change radically. Therefore, traders of the pair should carefully and carefully monitor the news flow on Brexit. All other fundamental factors traditionally fade into the background.

The material has been provided by InstaForex Company -