GBP/USD falls to a session low of 1.2300
The pound has been on a tear this week but as mentioned yesterday, this is where things start to get a bit tricky for the currency.
As price broke above key resistance around 1.2290-10, the technicals suggest that sentiment is starting to shift towards pricing out risks of a no-deal Brexit in a significant manner.
Are we really there yet? That is the big question.
Rebel lawmakers look set to get their way as the Brexit delay bill will almost certainly be turned into law before next week and that will force Boris Johnson to seek an extension to Article 50, which he claims he’d rather “be dead in a ditch” than doing so.
However, does that really change anything? Essentially, no. We’re still no closer to a Brexit solution and this is just prolonging the misery that the UK economy is suffering from.
Besides that, if the government does comply with the law passed, it means Johnson will be going to Brussels to seek an extension without a working majority – if he can’t call an election beforehand that is.
That is hardly a convincing enough argument/position for European leaders to grant an extension to Article 50 in my view.
For cable, a move back below 1.2300 will see sellers start to regain some confidence after three days of a beat down. If price starts tracking towards 1.2250-60 and break below that, I reckon we could start to see more even pricing about odds of a no-deal Brexit weighed against the current political developments.
At this stage, the key level for buyers to keep the upside momentum going remains the key hourly moving averages and that sits closer towards 1.2168 (100-hour MA) and 1.2190 (200-hour MA) respectively.
But any firm break towards 1.2500 requires Brexit developments to go in their favour, otherwise it is hard to see the pound be too optimistic based on current developments still.