GBP/USD is under pressure in the Tokyo session, trading at 1.2577 after falling from a high of 1.2597 to a low of 1.2566. In the previous session, the pound fell to its lowest level in around three weeks at 1.2433 before suffering losses as London turned around despite political headwinds for British Prime Minister Johnson. The greenback was sold, saving the day for long cables.
Boris Johnson survived a vote of confidence by 211 votes to 148. Yet his 59% vote share was lower than his predecessor Theresa May’s 63% in December 2018, when she was replaced seven months later, according to Reuters. Considering he now faces a leadership challenge, the win was bittersweet. With so many members of his party voting against him, the prime minister effectively lost his majority in parliament, putting his government in jeopardy.
Meanwhile, the 10-year Treasury yield fell overnight for the second day of trading this week, dropping from 3.062% to lows of 2.963%. As a result, the greenback fell to daily lows near 102.30 as measured by the US Dollar Index (DXY) against six currencies. In Asia, the DXY is regaining ground, rising 0.18% to 102.558.
Waiting, GBP/USD traders will be looking for clues on the Federal Reserve’s interest rate hike path this week and the European Central Bank. We are experiencing a Fed speaker blackout. The event will be important because it comes ahead of the Federal Open Market Committee meeting on June 14-15, when another 50 basis points of rate hikes are expected.
GBP/USD Technical Outlook
GBPUSD fell sharply to reach our second target of 1.2500 and is now trading around 1.2579, buoyed by Boris Johnson’s vote of confidence. However, the negative catalyst may push the price below the support levels of 1.2662 or 1.2330, keeping in mind that staying below 1.2590 is essential to achieve the suggested targets.
While a break above the 1.2596 level exposes the GBP/USD price towards 1.2660. Today’s trading range should be between 1.2460 support and 1.2596 resistance. Good luck!