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GBPUSD May Face Consolidation Heading Towards UK Elections


The GBPUSD did not react to news of the approval of Dec 12 as UK elections date by the House of Commons. Rightly so, as traders do not want to be caught out by the slew of data coming out on Wed. The most important of these is the rate decision and statement by the FOMC, which could have implications for the GBPUSD near-term.

GBPUSD continues to maintain the consolidation phase of the bullish flag on the daily chart, oscillating between 1.2788 and 1.2398 yesterday. The extent to which the flag is maintained or broken depends on today’s price reaction to the FOMC decision.

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Outlook for GBPUSD

Medium-term, the UK elections will play the next important role, heading into the 3-month Brexit extension. The reaction of the GBPUSD to the election will depend on whether the outcome would see more seats in the House of Commons shift from the Labour Party to the Conservative Party. This would in theory provide an easier pathway to Brexit by giving UK PM Boris Johnson the majority votes in parliament to plough through his Brexit chart.

Near-term, 1.2783 and 1.2587 remain the downside targets if the FOMC provides a favourable outcome for the US Dollar. If the FOMC fails to act by leaving rates intact, we may see increased month-end flows which are expected to be USD-negative coming into play, leading to limited upside on the GBPUSD towards 1.3173.

It is likely that  the price levels of 1.2587 and 1.3173 may be the boundaries for the price range of the GBPUSD heading towards the UK elections on Dec 12.Download our latest quarterly market outlook for our longer-term trade ideas.

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