GBP/USD: Energized for Another Rally

FXStreet  |

Pixabay, David Mark

  • GBP/USD has hit new seven-month highs as the Tories remain well in the lead.
  • Speculation about the elections and trade headlines are set to dominate trading.
  • Monday's four-hour chart implies more gains are likely.

"Dude, we're going to energize this country" — These words from Boris Johnson on the eve of becoming prime minister seem relevant to the pound. GBP/USD has hit a seven-month high at 1.3181 as weekend polls have shown the Conservatives holding onto a double-digit lead against Labour. Britain Elects' poll tracker is showing a gap of 11.9 points – 42.9% against 33% – up 0.5 in favor of the ruling party.

The opposition party's advance in the polls seems to have stalled, despite revealing a leaked government memo showing the need for customs checks in the Irish Sea—claims that were denied by the government.

Financial markets prefer a clear-cut victory for Johnson, one that will pave the way to ratifying his Brexit deal with the EU and to enacting market-friendly policies. Investors are wary about Labour leader Jeremy Corbyn's left-leaning policies and the uncertainty he provides about Brexit.

Johnson and Corbyn faced each other on Friday for the second televised debate that was unmemorable, according to political analysts. A snap poll by YouGov showed the PM won the contest according to 52% of those surveyed. This figure echo the Leave victory in the 2016 EU Referendum.

Political leaders are set to intensify their campaigning today and may release market-moving statements. New opinion polls will also have their say with only three days to go.

Upbeat US figures and another deadline

Pound/dollar has been recovering from a downfall on Friday, driven by optimistic US figures. Non-Farm Payrolls beat expectations with 266,000 jobs gained in November, and an annual increase of 3.1% in salaries. Consumer sentiment also exceeded forecasts.

Barring a last-minute deal, the US is set to slap new tariffs on China on December 15, this coming Sunday. While the world's largest economies have generally been expressing optimism, recent developments have caused worries among investors. If the US moves forward with new tariffs, the safe-haven dollar has room to rise. A resolution would weigh on the greenback.

Trump called on the World Bank to keep China out of the loop. Beijing has reportedly instructed local companies to reduce their reliance on foreign computer hardware and software. Moreover, China reported a disappointing drop in exports in November, most notably a 23% fall in those going to America. The 18-month long trade war has already caused long-term damage.

Overall, UK politics are set to dominate currency trading, with trade war headlines likely having an ancillary impact.

GBP/USD Technical Analysis

GBP USD Technical Analysis December 9 2019

Click to enlarge

The Relative Strength Index on the four-hour chart has dropped below 70 – thus outside overbought levels. That is a positive sign for GBP/USD. Upside momentum remains robust, and the currency pair holds above the 50, 100, and 200 Simple Moving Averages.

Resistance awaits 1.3265, last week's high — next, the recent peak of 1.3181. Further above, 1.3275 dates back to March. Next, 1.3380 is 2019 high.

Support awaits at 1.3100, which was the low point on Friday. 1,3050 held the pair down in May. Next, 1.3013 is October's high, and 1.2985 was the peak in November.


Equities Contributor: FXStreet

Source: Equities News

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