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Today’s Trading Edge: GBP/USD jumps as UK PM May calls for early June election in attempt to strengthen position in upcoming Brexit negotiations

Posted by WorldWideMarkets . on Apr 18, 2017 5:12:09 PM

WWM GBPUSD APR 18 2017.jpg 

The British pound surged after Prime Minister Theresa May decided on calling a snap general election because she wants to secure a big parliamentary majority before the Brexit talks intensify.  She noted that the election is needed to secure stability of government and that Brexit negotiations would have been hampered by a later vote. 

The British pound rose over 400 pips following the surprise announcement.  Initial polls show that PM May has a strong lead and is expected to secure political support for all decisions in the coming months. 

Price action on the GBP/USD daily chart shows the surge took out the 200-day SMA and that the next resistance level may come from the psychological 1.3000 region.  It is around that area that price could also form a bearish butterfly pattern.  Point D is targeted with the 141.4% Fibonacci expansion level of the X to A leg and the 161.8% Fibonacci expansion level of the B to C move.  If valid we could see a major reversal target the 1.2600 region.  If the pattern is invalidated, further upside may target the 1.3320 level. 

The trade: Sell GBP/USD at 1.3050 with a stop loss at 1.3150 and a take profit at 1.2750.  The Risk/Reward Ratio is 1:3

Topics: GBP/USD, gbp/usd sterling, $GBP, Sterling, UK

 

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