GBPUSD Forecast: Surrounded by the uncertainty clouds.

GBPUSD is surrounded by Brexit, US-ChinaTrade War, Global Trade War and Tariffs, Global Growth uncertainties

Brexit: The increasing possibility of hard Brexit adding weight on the Sterling. Replacement of Prime Minister May is likely to dominate the Brexit discussion for June and probably most of July as well. Sterling has fallen as the market fears that the next Tory leader will be willing to leave the EU without an agreement. On the other hand, some political analysts believe that such a position could alienate the Democratic Unionist Party from Northern Ireland. Northern Ireland voted for pro-European Parties in the recent EU Parliament elections. The withdrawal of the DUP's support could trigger national elections, which in turn could force the UK to seek another postponement for withdrawal or possibly revoke Article 50 and begin again.

On the other side, the macroeconomic figures of UK are still promising and coming out stronger than expectations. And BoE is ready to go to a Rate Hike as soon as Brexit reaches a positive solution

Trade Wars:
Wall Street woke up Friday morning to a new front in the trade war. President Donald Trump announced late Thursday night that the U.S. will impose a 5% tariff on all Mexican imports beginning June 10.
The White House said it will increase the tariff in the coming months if Mexico doesn’t take steps to control its border with the U.S.
Stocks opened down more than 300 points as strategists scrambled to assess the latest fallout and how best to advise clients.
Some market players view this as an attempt to show action on the immigration issue while also pressuring congressional Democrats to pass USMCA.
Two things can be assured in a trade war – slower growth and higher prices for all parties involved. The tariffs wouldn’t last long but the damage may already be done.

FED Rate Cut Possibility:
Investors who were hoping Trump would rescue the stock market are now counting on the FED.
Fed funds futures were pricing a 64% chance of either a half per cent rate cut or two quarter-point cuts by the end of the year. The market expectations Friday for a Fed rate cut jumped to 74% on Bloomberg.
And there are postponed auto tariffs on the table.
The picture is clear: USD is stuck between safe-haven demand and stongerFED rate cut expectations. The question is “how much it is priced in.”
My view is that the chance of a one rate cut in Q4 is already priced in and there is no pricing for the second rate hike as the market does not give a chance.

Depending on the data outcomes, we may see volatility in DXY but the main trend is likely to remain bullish. ( DXY analysis will be published later)

Technically:

1.28700 is the key resistance and selling pressure remains below as long as Cable stays below 1.28700.

Bullish Butterfly and RSI divergence indicate a technical correction.

1.23700 is the key support and the medium-term target of the pair.

H4 Chart:


Price is below EMA50 in bearish territory.

1.27950 is near term resistance and potential bearish cypher pattern would be completed at D.

Bullish MACD, RSI and OSMA divergence are found.

H1 Chart:


Wedge Pattern is found. 70% downside possibility.

Inside Bar breakout as described on the chart.

I will update later.