GBP/USD extended the bullish trend for the second consecutive week, first by last week's call for earlier elections by June 8th 2017, second by PM May patriotic speech yesterday asking voters in Leeds to put aside traditional allegiances and vote in the national interest. On the other hand, it is most likely that UK lead by PM May, will seek a soft Brexit rather than hard one. As a result, the pair surged 77-pips yesterday with 1.2916 Nov-2016-highs and expectations are highly that the pair will overpass Thursday's high as the pair opened with bullish trend. All this comes before UK releases local GDP today with 0.4% expectations compared to 0.6% on last session. GBP/USD currently trading 1.2912 intraday.
Trump's Tax Plan was delivered on Wednesday's night, but market reacted negatively with the details with hints that, such plan, will lead only to trade balance deficit. Along with it came disappointing U.S economic data, weighing more pressure on US dollar and the index collapsed at 98.69 low, giving additional support to GBP/USD bullish forces.
In view of René Defossez, Research Analyst at Natixis, Theresa May’s decision requesting snap elections on 8 June makes a lot of sense strategically: the Conservative party has a very comfortable lead in the opinion polls and there is every likelihood it will increase its current 17-seat majority in Parliament.
Key Quotes:
“The UK’s economic situation remains very favourable: the unemployment rate is only 4.7%, and the IMF’s 2017 growth forecast for the country has just come in for a sharp upward revision to 2%. If May to be elected, PM will be able to negotiate more serenely with the UK’s European partners. The main enemies from within will be inside the Conservative party (namely the hard Brexiters) but, for Theresa May, the legitimacy conferred by these snap elections will help her asset her authority.”
Fundamentals ( Economic News )
1- GBP - UK Prelim GDP q/q today at 8:30 AM GMT.
2- USD - Advanced GDP q/q today at 12:30 PM GMT.
Technical Overview:
Trend: Bullish
Resistance levels: R1 1.2942, R2 1.3066, R3 1.3149
Support levels: S1 1.2775, S2 1.2683, S3 1.2591
Comment: Look forward for UK and U.S Data today which will settle the pair price action. The market continues to show significant upside breakout, holding projection to 1.3149. A close above 1.2881 should fuel pressing rallies to reach R1 level. We may yet see several days of congestion / corrections, but holding over 1.2721 treats congestion as a bull flag or staging levels for rallies. A penetration for S2 alerts for inauguration for trend reversal, but only a close below S3 is needed for bearish trend confirmation.
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