- GBP/USD has been struggling below on a gloomier global mood.
- Brexit negotiations are stuck, and the collapse of Thomas Cook also weighs.
- Monday’s technical chart is pointing to further potential downfalls.
“Don’t book it, Thomas Cook it” – was one of the travel firm’s slogans over 178 years of existence – and it’s now come to an ignoble end. The collapse of the long-lasting British firm has left 150,000 holidaymakers stranded – and dampened the mood. GBP/USD has been on the back foot, falling from the highs and extending its retreat.
Conference season – Labour’s turn with Brexit
Labour politicians are criticizing the government for its handling of the bankruptcy – and it provides them some relief from Brexit. The main opposition party is holding its annual conference in Brighton and seems torn between the young urban voters who support remaining in the EU and MPs from constituencies who support leaving.
Party leader Jeremy Corbyn – which has never been a fan of the bloc – and the rest of the leadership are trying to find a way to unite the party and to appeal to voters. Their opinion matters as Brits may be called to vote soon, and Labour’s perceived dithering is costing them votes.
The Liberal Democrats have further established themselves as the party of Remain by vowing to revoke Brexit without another referendum if they lead a government. The ruling Conservative Party has moved more also to the Brexit camp under prime minister Boris Johnson, who has pledged to leave by October 31 – “do or die.” Labour’s position – to be ironed out in the next few days, is set to impact the pound.
UN Assembly, trade
The PM is attending the United Nations General Assembly in New York where he will meet some of his European counterparts. However, no breakthrough is likely ahead of the Tories’ conference next week. Nevertheless, Johnson has expressed optimism. The pound – which rose on hopes for a breakthrough last week – is now retreating.
Parliament remains suspended, but that may come to an end soon. The UK’s Supreme Court is set to rule on the challenge to the government’s prorogation of the House of Commons within the next 24 hours. Fresh debates would disrupt the conferences’ timetables and could add pressure on the government.
On the trade front, markets are less cheerful than last week. While both the US and China say that talks are constructive, Trump said he wants a full deal – which is harder to achieve – than a limited one. Investors have also become skeptical that the Fed will cut rates again – and this notion keeps the greenback bid.
Overall, political developments are set to dominate. Keep one eye on a potential court ruling as early as today.
GBP/USD Technical Analysis
The general picture remains bullish, but less than it was last week. Momentum on the four-hour chart has turned to the downside, and GBP/USD dropped below the 50 Simple Moving Average. Nevertheless, it trades above 100 and 200 SMAs.
GBP/USD has some support around 1.2420, which is the daily low. More importantly, 1.2390 is a clear separator of ranges after capping cable in early September and then switching to support. 1.2360 was a resistance line early in the month, and 1.2280 provided support later on.
Resistance awaits at 1.2490, which is the daily high. Next, we find 1.2525, which was a swing high last week — the cycle high of 1.2570 – the highest in two months – towers above.
Equities Contributor: FXStreet
Source: Equities News