09:09, 04 October

Drops to Three Week Low Below 1.2950 as PM May Battles for Survival

The last couple of weeks have seen the GBPUSD fall sharply from a two month high just shy of 1.33 down to a three week low just below 1.2950 in the last 24 hours. Over the last month, the 1.3050 level has become significant by repelling the sterling on several occasions and more recently propping up the currency. Now that the GBPUSD has broken down through this level it may experience some resistance should it rally higher soon. Around mid-August, the GBPUSD also rallied well which saw it regain lost ground from a 15 month low below 1.27, before reversing strongly again at 1.3050.

Throughout July the GBPUSD was content to trade in a very small range right around the 1.31 level. It was also feeling some selling pressure from the resistance level at 1.32. The 1.30 level that provided strong support to the GBPUSD and was a key level throughout 2017 seems to have lost its significance as the 1.3050 is more relevant presently. Throughout most of May, the GBPUSD dropped dramatically from the resistance level around 1.43 down to the 1.32 level. The 1.36 level provided some resistance to the sterling in the last nine months or so and providing a little bit of support, except the GBPUSD continued lower through this level.

Earlier this year we were looking at the resistance level at 1.43 looming like a dark cloud in the distance ready to strike. Several times this year the resistance around that level stood firm and sellers jumped all over the GBPUSD forcing it down to several lows. Interestingly, despite all the aggressive selling, it wasn’t so long ago the GBPUSD hit a two year high above 1.43.

The British Prime Minister (PM) Theresa May continues to fight for her political survival.MP Henry Smith has warned against a change of leader before Britain leaves the European Union in March 2019, however, he has claimed that PM May is not expected to remain PM "much beyond" Brexit. Mr Smith was quoted as saying, "I don’t think to seek to change the leader right now is probably in the national interest although I think we could’ve had a stronger negotiating position with somebody else."That is very difficult, but I don’t think the Prime Minister, Theresa May, can continue leading this party much beyond the exit date of 29 March. I would expect there to be a change of leader next summer."Mr Smith insisted the British Government would have had a "stronger negotiating position" if PM May had not been leading the Brexit negotiations.