The British pound sold off early on election Thursday after the NOP/Ipsos Mori poll showed that the Conservative Party would fall short of the outright majority by 16 seats. Betfair odds also show Labour’s Corbyn seen as the frontrunner of becoming the UK’s Prime Minister. Sterling recovered some of the initial losses after the BBC forecasted Conservatives will win 322 seats and that Labour would win 261.
The GBP/USD daily chart shows the since making a 31-year low in early October, price has slowly made higher lows and higher highs. Price has now been unable to recapture the psychological 1.30 handle and is now tentatively below the 50-day SMA. If we see sterling weakness persist, price may target the 200-day SMA, which trades at the 1.2576 level. Deeper support may come from the 1.2419 level. To the upside, 1.2870 remains initial resistance.
The trade: Buy GBP/USD at 1.2450 with a stop loss at 1.2350 and a take profit at 1.2750. The Risk/Reward Ratio is 1:3