GBP/USD: Critical Resistance Overhead Amid Brexit Mess

The Sterling has put on a stellar performance in the last 24h of trading, even challenging the aggressive buy-side flows going through the books in the Japanese Yen, on the basis that kicking the can down the road a few more weeks/months in the Brexit saga removes an immediate uncertainty. However, with Theresa May facing its toughest hours and her days as PM potentially numbered, this creates yet another source of uncertainty for markets, as the range of scenarios widens, even if judging by price action, the market seems to see a replacement for May as not increasing the tail risk. We are at peak noise in Brexit, which means, trading intraday price action becomes a more difficult exercise of reading the flow and be prepared for whipsawing price fluctuations on a headline by headline basis. Friday’s volume profile formation, despite it shows a P-shaped bullish structure, it is headed straight into the stickiest horizontal level of resistance in the chart, which carries the risk of the recent breakout of a descending trendline being a bull trapped. On the way down, there is now the extra support of a newly formed ascending trendline, making 1.3245-50 all the more relevant. The intermarket analysis is a mixed bag of conflicting signals for now, with DXY inverted heading lower and the UK-US bond yield spread looking to retest recent highs.