GBP/USD pauses 4-day winning streak ahead of UK election

GBP/USD stalled its recent bullish run in Asia this ‘Super Thursday’, as the bulls remain on the back foot ahead of the key risk event – British election, which will shape up next direction for the pound in the coming months.

GBP/USD offered near Wednesday’s high of 1.2969

The pound erased gains against its American counterpart during mid-Asia, leaving GBP/USD modestly flat near daily lows of 1.2955. The GBP markets are gripped by cautiousness, as Britons head to polls later today, with sterling seen as the biggest loser if the UK election fails to deliver any winner and results in a hung parliament.

However, there are slim chances of a hung parliament, as the final opinion polls released a day ahead of the UK vote, suggest that the UK PM Theresa May is headed to increase her majority in the parliament. A Conservatives’ victory could provide the much-needed impetus to cable, taking a rate sharply through 1.30 handle for a test of eight-month tops of 1.3051.

However, the GBP/USD rally on Theresa May’s win could soon fizzle, as markets assess its implications on the Brexit negotiations, with ‘Hard Brexit’ widely anticipated. Also, of note for the markets will be the ECB policy decision, which could have ‘rub-off’ effect on the GBP, as investors gear up for the exit polls due to be reported on Friday Asian morning.

GBP/USD Levels to consider            

James Chen, Head of Research for Forex.com noted: “Currently, the pair has once again approached major psychological resistance around the 1.3000 level, which was reached and slightly breached in May before a sharp pullback. A key technical event to watch for would be any strong re-break above 1.3000 on an election-driven boost for the pound, in which case a key near-term upside target is around the 1.3250 price region.”

“If GBP/USD fails to break above 1.3000 and instead breaks down below the noted uptrend line on a surprise pound-negative election outcome, key short-term downside targets are at the 1.2800 and 1.2600 support levels, “James added.