GBPUSD traded higher in yesterday’s trading amid news that Chancellor of the Exchequer Sajid David’s resignation. The currency pair rallied 126 pips from its intraday low to peak at 1.3068. By the end of the day, it had settled at 1.3042.
Sajid Javid, Chancellor of the Exchequer of the UK for the past 8 months, abruptly resigned yesterday after fighting off Prime Minister Johnson’s efforts to control the chancellor’s office. His resignation came after his meeting with Johnson who supposedly demanded that the Chancellor fire all of his advisers. This news should have been bearish for the pound because it points at political uncertainty, however, a new Chancellor was immediately appointed. Rishi Sunak, who is considered as a close ally of the Prime MInister, is the new Chancellor.
It also helped the pound that the RICS House Price Balance Report topped expectations. House prices for January rose by 17% and topped forecasts which were for a 3% uptick.
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On the hourly time frame, we can see that GBPUSD has consolidated after a sharp rise. Consequently, a bullish pennant chart pattern has formed. In forex trading, this is considered as a bullish continuation signal. A close above yesterday’s high at 1.3068 could mean that GBPUSD is on its way to rally to its January 21 highs at 1.3145.
On the other hand, it’s worth pointing out that GBPUSD has some room to trade lower and still maintain its uptrend. By connecting the lows of January 10, January 11, and January 13, we can see that trend line support falls around 1.2990. This price also coincides with the 61.8% Fib level when you draw the Fibonacci retracement tool from the low of February 13 to its swing high.