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GBP/USD: Two Critical First Acts of Boris Johnson

GBP/USD has been rising ahead of Boris Johnson's entry into No. 10. Johnson's first speech as PM and his pick of Chancellor are critical. The technical chart shows that downside momentum has waned.
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FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market and was founded in 2000. The website offers a wide range of tools and resources: 24/5 currency news, real-time economic calendar, advanced rates and charts, educational webinars, analysis reports, forecasts, Learning Center, newsletters, industry services, FX customizable studies… As its distinctive trademark, the portal has always been proud of its unyielding compromise to provide neutral and unbiased information and to enable its users to take better and more confident decisions. FXStreet has managed to gain the collaboration of the entire Forex industry, from individual professionals and small companies right up to Forex Brokers and Investment Banks. FXStreet covers the FX Market 24/5: an expert team of journalists, traders and economists picture what the market is doing and what is happening as it happens. Besides the main website in English, the portal is available in 16 other languages (English, Japanese, Simplified Chinese, Traditional Chinese, Spanish, Russian, Arabic, Turkish, Indonesian, Portuguese, German, French, Italian, Hungarian and Vietnamese, Korean and Catalan). FXStreet was short listed as “Best e-FX initiative of the year (vendor)” for the FX Week e-FX Awards 2010.

  • GBP/USD has been rising ahead of Boris Johnson’s entry into No. 10.
  • Johnson’s first speech as PM and his pick of Chancellor are critical.
  • Wednesday’s technical chart shows that downside momentum has waned.

Boris Johnson, PM – a moment that many believed will never come is happening today. The former foreign secretary, mayor of London, editor, and journalist is set to enter 10 Downing Street with one gargantuan task – delivering Brexit by October 31st. During the leadership contest, Johnson has promised to leave the EU by the deadline – “do or die”. While the pound has been falling on the prospects of a no-deal Brexit in the past few weeks, it enjoys a reprieve today.

Is it a real recovery or just another “dead cat bounce” before hitting a new two-year low? The answer depends significantly on Johnson’s first day in office. The controversial candidate will make his initial speech as PM just after being appointed by the Queen. If he repeats his hardline stance on Brexit, the pound may turn back down. However, if he sticks to the recent optimism that he conveyed without vowing a hard exit, Sterling may rise.

Immediately afterward, Johnson will begin appointing his cabinet and markets will closely watch his choice of Chancellor of the Exchequer. Outgoing Chancellor Phillip Hammond is a staunch Remain supporter and a well-respected figure. He has pledged to resign before being sacked. If Johnson appoints a like-minded responsible professional, the pound may advance. However, if his choice is an inexperienced loyalist Brexiteer, the currency may turn south.

GBP/USD’s current rise may be seen as profit-taking after cable’s previous downfall – dipping below 1.2400 and hitting its lowest level in two years. However, some hope that Johnson – often criticized for caring only about himself – will change his tack on Brexit and opt for a softer exit to safeguard the economy and his seat.

Earlier, the US dollar gained ground as the US and China announced fresh face-to-face high-level talks – the first since May. A better atmosphere around trade reduces the chances of extensive stimulus from the Federal Reserve. Nevertheless, US Commerce Secretary Wilbur Ross has downplayed expectations.

US economic indicators include Markit’s Purchasing Managers’ Indicators (PMIs) and New Home Sales.

All in all, Boris Johnson is in the limelight.

GBP/USD Technical Analysis

GBP USD technical analysis July 24 2019

GBP/USD has tackled the 50 Simple Moving Average on the four-hour chart which coincides with the 1.2480 which was a swing low in early July – critical resistance. Further up, 1.2510 is where the 100 SMA meets the chart, and 1.2560 was a peak earlier this month.

Support awaits at 1.2440 which provided support in mid-July and also earlier this year. It is followed by the recent swing low of 1.2420 and by the 2019 low of 1.2380 recorded last week.

Downside momentum is waning and the Relative Strength Index is moving up – both positive signs. Nevertheless, the pair is capped by critical SMAs, as mentioned earlier.

Equities Contributor: FXStreet

Source: Equities News

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