GBP/USD Struggles at $1.2596 – Boris Johnson Survives Confidence Vote
Skerdian Meta • 2 min read
GBP/USD is under pressure in the Tokyo session, trading at 1.2577 after falling from a high of 1.2597 to a low of 1.2566. In the previous session, sterling fell to its lowest level in approximately three weeks at 1.2433 before snipping losses as London flipped over despite political headwinds for British Prime Minister Johnson. The greenback was sold, saving the day for cable longs.
Boris Johnson did survive a confidence vote by 211 to 148. Still, his 59 percent share of the vote was less than his predecessor Theresa May’s 63 percent in December 2018, when she was replaced seven months later, according to Reuters. Given that he now faces a leadership challenge, the victory was bittersweet. With so many members of his party voting against him, the prime minister has effectively lost his majority in parliament, putting his government in jeopardy.
Meanwhile, the 10-year Treasury yield fell overnight for the second day of trading this week, falling from 3.062 percent highs to print lows of 2.963 percent. As a result, the greenback was dropping to the day’s lows near 102.30 as measured by the US dollar index (DXY) against six currencies. In Asia, the DXY is regaining ground, rising 0.18 percent to 102.558.
In the meantime, GBP/USD traders will be looking for clues on the Federal Reserve’s interest rate hike trajectory this week and the European Central Bank. We are experiencing a Fed speaker blackout. The event will be significant because it comes before the Federal Open Market Committee meeting on June 14-15, when another 50 basis points of rate hikes are expected.
GBP/USD Technical Outlook
The GBPUSD pair fell sharply to reach our second target of 1.2500 and now trades around 1.2579, amid positive sentiment driven by Boris Johnson’s surviving confidence vote. However, the negative catalyst may push the price below the support levels of 1.2662 or 1.2330, keeping in mind that staying below 1.2590 is critical for achieving the suggested targets.
Whereas, a break above the 1.2596 level exposes the GBP/USD price towards 1.2660. Today’s trading range is expected to be between 1.2460 support and 1.2596 resistance. Good luck!