During the current week the pair continued to trade within the lateral channel of 1.2850-1.2770 that it entered after the decision of the UK Prime Minister Theresa May to hold early parliamentary elections. Since them the pair experiences driver deficiency, and the market is waiting for the beginning of the election campaign and the results of Brexit negotiations. As of now, the parties have only exchanged general statements. For instance, the Secretary of State for Exiting the European Union David Davis stated today that the UK wanted the negotiations to be swift and efficient but the tasks posed before the parties were too volumous. A Keir Starmer, a prominent Labour Party member claimed that the discussion of the UK’s membership in the customs union had to be the main topic of discussion. The continuation of membership is a negative option for the Britsh government.
Today the movement of the pair may be influenced by the news from the USA where President Trump is about to annouce the details of his tax reform. According to Washington Post, he may reduce corporate income tax from 35% to 15%. If these expectations prove to be true, it may lead to the strengthening of US dollar.
Support and resistance
Technically the pair is located within the range of 1.2850-1.2770 and is moving to its lower border (which is about to coinside with the lower line of BollingerBands and Fibo correction 23.6%). The price is likely to continue moving in the channel in the near future. In case of positive reaction of the market to Trump’s tax reform and breaking through the lower border of the channel downward movement to the levels of 1.2700 (Fibo correction 38.2%) and 1.2635 (Fibo correction 50.0%). Technical indicators show reduction, Stochastic left the overbought zone, forming a sell signal, MACD histogram is lowering in the positive zone.
Support levels: 1.2770, 1.2700, 1.2635.
Resistance levels: 1.2850, 1.2900, 1.2960.
In the current situation trading within the channel with placing deferred limit orders at its borders seems preferable.
If the price consolidates below 1.2770 short positions may be opened with targets at 1.2700, 1.2635 and stop-loss at 1.2800.