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Today’s Trading Edge: GBP/USD volatility runs high as UK polls send mixed messages

Posted by WorldWideMarkets . on May 31, 2017 6:53:05 PM

WWM GBPUSD MAY 31 2017.jpg

The British pound sold off early on Wednesday after the YouGov poll showed that the Conservative Party would fall short of the outright majority by 16 seats.  Sterling reversed those losses after a new poll by Panelbase put Conservatives at 48% and Labor at 33%, a gain of 1 percentage point from the Mid-May poll. 

As we approach the June 8th elections, if PM May’s conservatives lose their lead, we could see the pound decline sharply.  Widening of her lead would be supportive for cable as she would be expected to gain a supermajority in Parliament and be able to conduct her negotiations from a position of strength. 

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 formed 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 the bearish move accelerates, we could see price target the 1.2600 region.  If the pattern is invalidated, further upside may target the 1.3320 level. 

The trade: Buy GBP/USD at 1.2650 with a stop loss at 1.2550 and a take profit at 1.2950.  The Risk/Reward Ratio is 1:3

Topics: GBP/USD, $GBP, Sterling


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