Lack of Catalyst Preventing Breakout

Following our last week’s report on GBP/USD, the pair is still trading in its flag formation, while currently testing near its top-levels. Overall price action remains healthy above its demand zone, with its 18EMA providing support for any price retracement. 

 In terms of MACD, although still in a bearish zone, it is starting to show its weakness, with the MACD line (blue) ready to make a bullish crossover with its signal line (orange). However, lack of catalyst, specifically the uncertainties surrounding UK’s general election results is holding back the pair to breakout from its consolidation zone. Price action are expected to continue its trading within the bullish flag until further clear sentiment surface in the market.

 From the fundamental point of view, optimism remains in the market with hopes that UK PM Boris Johnson’s Conservative Party will be able to obtain majority according to latest pre-election polls. According to YouGov, current polling results showing the Conservative leading with 359 seats, while Opposition Labour with 211 seats out of the total 650 seats. Latest polling results boosted investors’ confidence towards the pound, allowing it to hold its grounds despite a higher dollar.   

However, delivering Brexit would be one thing, on the other hand, there’s still concerns towards UK’s economy performance during the transition period after Brexit. New trade agreements must be discussed with EU counterparts as well, which adds on market uncertainties. All in all, the primary focus is still the election results and the delivering of Brexit first which could help see the pair of GBP/USD breaking back above its 1.3000 handles.