The Pound Sterling (GBP) was trading slightly lower against the US Dollar at around 1.3237 during the European market session on Tuesday.
The market is currently on alert and looking for clear clues about the direction of the United Kingdom's (UK) fiscal policy following the surprise announcement of the resignation of Prime Minister Keir Starmer yesterday. However, Starmer assured that the transition of power will take place in an orderly manner.
Who Will Replace Starmer? Andy Burnham Becomes the Frontrunner
Starmer's resignation paves the way for Greater Manchester Mayor Andy Burnham to take over the leadership. Burnham's name has indeed been mentioned as a replacement candidate since the Labour party suffered a heavy defeat in the local elections last May. His chances have become brighter after winning the by-election in the Makerfield constituency last week.
So far, the currency market and UK bond yields (gilt yields) have not seen extreme volatility as investors are still waiting to see how fiscal administration will be under the new leader.
Economists from Societe Generale commented:
“The market is now more focused on the bond market (gilts) than the Pound. In the medium term, the market is expected to start shaking (nervous) when the fiscal policy statement is released.”
In addition to political issues, GBP traders are also waiting for important economic data, namely the S&P Global UK PMI Flash Data (June). The services sector is expected to improve to 50.0 compared to 49.3 in May. (Note: A figure above 50 indicates that business activity is expanding).
Technical Analysis GBP/USD: The ‘Bearish’ Trend Is Still Strong!
Based on the chart, the current GBP/USD price movement is still in favor of the decline (bearish bias):
Critical Level Test: The price is currently testing the breakdown area of the Symmetrical Triangle pattern. Usually, if this area fails to be broken back up, the price will start a new phase of decline.
EMA Indicator: GBP/USD remains below the 21-day Exponential Moving Average (EMA) at 1.32452, confirming the short-term trend is bearish.
Important Support & Resistance Zones:
Support Zone: If the price breaks below the June 19 low (1.3163), the next target for decline is 1.3096, before risking testing the psychological level of 1.3000.
Resistance Zone: Initial resistance is at the broken uptrend line around 1.3251. GBP/USD needs a daily close above this level to reduce selling pressure.
Conclusion for Traders: UK political issues are still the main driver of the Pound's movement. As long as the price does not break the 1.3251 resistance line, those of you who are Short/Sell can continue to look for setup opportunities to the downside. But remember, always take care of your money management (MM)! Do you think GBP/USD can break below 1.3200 this week?
