Pound/dollar made a huge leap forward on April 18th, riding on the announcement for an early snap election. Here are five reasons why the elections are pound positive.
GBP/USD is already trading above the initial post-Brexit low of 1.2790 seen in late June 2016, just after the EU Referendum. In general, we are back to the range the pair traded in the summer of that year.
What levels should we look at?
GBP/USD immediate levels
The pair is trading at 1.2830 at the time of writing. The aforementioned first Brexit low at 1.2790 provides immediate support. The line was also challenged in July last year.
On the topside, the pair finds resistance at 1.29. This is a round number and also served as support back in September. Topping it off, it was the peak of the April 18th rush higher, also ignited by a rapid short squeeze.
GBP/USD further above
1.30 is the next obvious level. The number was eyed immediately after the vote. Despite not working as real support or resistance, it has a psychological effect.
Further above, 1.3120 capped the pair back in September and is a strong line of resistance. It limited the pair’s advance when it was under pressure, just before the October flash crash.
Further to the upside, we find the August high of 1.3275. Looking even further, 1.35 was the top of the 2016 range trading and also the 2009 low. Sterling never managed to top this level since the Brexit vote.
GBP/USD support at previous resistance levels
Below 1.2790, we find levels that have recently worked as resistance. 1.27 capped the pair in early 2017 and is the first line of defense.
Next in line, 1.2615 serves as a stepping stone to 1.2560, which capped the pair just before it made the great leap.
1.2415 was a pivotal line within the previous range and 1.2350 is already stronger support. 1.2250 and 1.21 are the last lines before 1.20.
More: GBP: More Short Covering On UK Snap Election To Bring 1.3445 In Focus – NAB
Here is how it looks on the chart:
