10.10.201701:09 Forex Analysis & Reviews: The pound was the victim of a conspiracy

"Cherchez la femme" or look for the woman. Market participants are looking towards Theresa May whose weak speech at the Conservative Party Congress led to the worst week for the pound since the beginning of the year. Since September 20, the GBP / USD quotes have lost more than six figures. However, if many people believed in the usual correction before the prime minister's speech, now the situation looks much more serious. Morgan Stanley and Nomura draw prospects of sterling in gray paints, and HSBC and does believe that its rate will fall to around $ 1.26 by the end of this year.

Rumors of a conspiracy to replace the leader, in which about 30 members of the parliament-representatives of the Tories has allegedly taken part of, hit the pound much more than the decline in productivity in the Foggy Albion to its lowest since 2013. When it comes to the uncertainty that is likely to lead into early elections and the change of leadership of the party (at the head of the conservatives there may be a supporter of a rigid Brexit), investors prefer to sell the GBP / USD.

The situation was aggravated by the fact that by the end of the week on October 3, speculators had increased net longs for sterling from 5,044 to 19,949 futures contracts. This is the highest mark since September 2014. As soon as political risks surfaced, the bulls immediately decided to reinsure themselves and get out of positions with the least losses.

Dynamics of speculative positions on the pound

Source: CFTC, Financial Times.

By the end of the week, on October 6, Theresa May has attempted to restore the shaky credibility of the party and stated that she was still the leader of the Conservative Party, but this provided only short-term support to the bulls of the GBP / USD pair.

The analyzed pair showed increased sensitivity to statistics on the US labor market. For the first time in the last seven years, employment outside the agricultural sector was marked by negative growth, while the average wage, on the contrary, accelerated to 2.9%. Obviously, the final figures were influenced by Hurricanes Harvey and Irma. The lowest paid categories of workers were affected, which affected both key indicators.

Doing trades for GBP / USD traders throughout the week will be a difficult. The macroeconomic calendar for the States is full of important releases, including producer and consumer prices, retail sales and core inflation, and the publication of the September FOMC meeting. The key events for Britain will be the attempts of Theresa May to return the position of her party representatives and the published data on industrial production. Assuming that the conflict inside the Tories is quickly extinguished (few believe that the Prime Minister will be thrown out of Downing Street), one can expect a gradual stabilization of the quotations of the analyzed pair in the range of 1.3-1.33.

Technically, the fact that the bulls in the GBP / USD managed to catch hold of important support level at 1.3020-1.3025 (38.2% of the last long-rising wave) inspires certain optimism among the sterling fans. However, without overcoming important resistance levels at 1.3225 and 1.327, it is not necessary to count on the recovery of the "bullish" trend.

GBP / USD, daily chart