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GBP/USD clings to 4-day high as USD pullback confronts Brexit optimism

2019-07-19 12:20    FXYEAH
  • House of Commons passed an amendment that restricts the new PM from suspending the UK Parliament before Brexit.
  • Increasing odds for a solution to the Irish border adds strength to Brexit optimism.
  • USD recovers after the NY Fed’s attempt to disappoint policy bears.
  • Absence of UK data continues to highlight politics/trade and the US consumer sentiment gauge for fresh impulse.

US Dollar (USD) recovery is struggling to oversee declining odds for a no-deal Brexit, which in turn flashes 1.2545 quote for the GBP/USD pair ahead of the London open on Friday.

The greenback trimmed overnight losses against the majority of counterparts after the Federal Reserve Bank of New York safeguarded its President John Williams bearish comments that helped to drag the US currency southwards on the previous day.

However, news that the UK’s Members of the Parliaments (MPs) passed an amendment to make it harder for the incoming PM to suspend the Parliament before Brexit reduced the odds of a no-deal departure and pleased the pair buyers. Adding to the strength could be the comments from the European Union’s Brexit negotiation Michel Barnier that the bloc is ready to work on alternative arrangements for Irish border issue.

While declining expectations of a no-deal Brexit favor the British Pound (GBP), the EU and the UK policymakers are still lacking the departure agreement (after it was failed by the Britain). Also, the latest amendment doesn’t totally restrict the new Prime Minister (PM) from suspending the parliament.

Elsewhere, the US-China trade discussion is on-going and diplomats from both the nations may soon meet each other in person, as Reuters conveyed quoting the US Treasury Secretary Steve Mnuchin.

Given the lack of economic data on the cards, the news headlines are likely to keep dominating the market sentiment whereas the US Michigan Consumer Sentiment Index for July, expected 98.5 versus 98.2, might also offer intermediate direction.

Technical Analysis

100-bar moving average on the 4-hour chart (4H 100MA) limits the pair’s immediate upside around 1.2550/55 amid overbought RSI, highlighting chances of a pullback to 1.2510/05 area comprising June month low and a drop towards July 09 low near 1.2440. Alternatively, pair’s upside clearance of 1.2555 can’t be considered as a strong signal for its rally as 11-week old descending trend-line ranged since early-May, at 1.2594, can question buyers, a break of which could recall towards late-June lows close to 1.2660.

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