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The Pound Is Controlled by Politics

Why is the Pound is retreating faster than usual right now?
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The British Pound is still controlled by politics. Positive dynamics relating to the Brexit negotiations between the United Kingdom and the European Union is immediately “undone” when the newsfeed shows some pieces of news where there are doubts about Theresa May and her competence to accomplish the procedure of the country’s exiting the EU.

Yesterday, investors found out that some members of the Conservative and Unionist Party in the Parliament had written a letter, where they impeached credibility of the British Prime Minister. In politics, it is called “a motion of no confidence”, which may really call May’s political authority into question. This political player is very important when it comes to the Brexit negotiations, and the more doubts and fears that she might be impeached, even theoretically, the worse for the Pound.

Changes in the country’s political course, even the smallest ones, may not only influence mutual approval of the Brexit political, commercial, and financial documents, but slow down the entire procedure as well. The European Union has already done a lot to make the negotiations time-consuming and unproductive, so there is no “extra” time left for the United Kingdom.

It’s clear that any negative piece of news of this kind may bring the Pound down and force it to fall against the US Dollar. However, there is one aspect, which will be kept hidden from prying eyes up to a certain time. In a couple of months, an important stage of the Brexit negotiations will start and it may reverse the momentum in favor of the UK. It is quite possible that due to this very reason right now the Pound is retreating faster than usual.

Long- and mid-term technical charts of the GBPUSD pair are still showing some uncertainty on the market. On one hand, the pair broke the support level of the long-term rising channel to the downside, but on the other hand, it is in no hurry to form a new descending impulse and continues trading inside the short-term flat.

The best way to predict the price movement this week is to check the H4 chart. This timeframe shows the downtrend. We should note that the rising short-term trend has broken the support level and, as a result, the instrument may start forming a new descending impulse with the first target at 1.3025. The next target is at 1.2917, which is near the support line of the short-term descending channel. This level may help us to predict future tendencies: continue falling faster or start a new correction.

Author: Dmitriy Gurkovskiy, Chief Analyst at RoboForex

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Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.