16.08.201915:18 Forex Analysis & Reviews: GBP/USD. House of Commons prepares for war with Johnson: pound spreads its wings

While the euro and the dollar are updating two-week lows, the pound shows courage, ignoring the overall strengthening of the US currency. The British have been trading in their own "coordinate system" in recent years, determining priorities among many fundamental factors. For example, this week, the pound ignored strong macroeconomic reports indicating an increase in inflation, wages and retail sales. However, the US statistics, which also came out positively, was ignored by GBP/USD traders. By and large, the pound responds only to news impulses regarding the prospects of Brexit. This topic overlaps all other fundamental factors, and this fact makes the pair difficult to predict.

Let me remind you that on Monday, the GBP/USD pair updated its annual low, reaching 1.2014. Despite the obvious dominance, the bears were not able to enter the 19th figure, after which the pair attracted buyers, due to which the price remained within the 20th figure. The southern impulse has faded not only for technical reasons but rather, on the contrary, fundamental factors have played a key role here. The British began to dive down against the background of the active actions of Boris Johnson on the preparation of "chaotic" Brexit. He created the so-called "military cabinet" from among the ministers, launched a large-scale information campaign and delivered a tough ultimatum to Brussels regarding the revision of the terms of the deal. In other words, all his behavior made it clear that Britain will not initiate another delay and is ready to withdraw from the EU without an agreement.

Perhaps, traders felt the reality of the implementation of the voiced intentions – earlier, such rhetoric of the office members on Downing Street was perceived by the market as a bluff from London. That is why the pound fell to multi-year lows but froze on the border between 20 and 19 figures. To overcome the key support level of 1.2000, stronger reasons are needed – and Johnson's "belligerent" intentions in this context will no longer help. Moreover, the current prime minister has a serious opponent – the British Parliament, which deputies aren't ready to satisfy his ambitions, silently agreeing to the implementation of the "rigid" scenario.

The closer to autumn, the more political statements of the members of the House of Commons are heard. The next political season in Britain promises to be "hot": the opposition leader did not have time to declare his readiness to initiate a vote of no confidence to Johnson, as there were the first signs that Labor and Conservatives can unite to block the "hard" Brexit. At the moment, about 50 Laborites have expressed their readiness to come up with a "United Front" with the centrists from the Conservative Party against the apocalyptic plan of the government. Also, many members of the House of Commons supported the idea of Corbyn on the establishment of the provisional government after the announcement of the vote of no confidence in Johnson and prolongation of the negotiation period with the EU.

However, most of the leaders of the political forces did not agree to see Corbyn as the head of the government of "national unity". In particular, the leader of the Liberal Democrats proposed other deputies to this post. It is noteworthy that the representatives of the Green party and the Party of Wales also agreed to support this idea. At the moment, there are political auctions, but even the fact of discussion of this issue provides background support for the British currency.

Thus, recent events suggest that the British Parliament is ready to "show its teeth" in early September, removing Johnson from his post and blocking the "hard" Brexit. And here it is worth recalling the events of 5 months ago when members of the House of Commons held a signal vote on all options for Brexit. Even then, it became clear that the parliamentarians largely softened their position on further relations with the European Union. For example, the option that Britain after Brexit was to create a Customs Union with the EU gained 264 votes. 272 deputies spoke against it, so the advantage was minimal. An option was also considered, which included the Common Market 2.0 option, in which the United Kingdom would remain in the European economic area and negotiate with the EU on a temporary customs union, which would be valid until an alternative was found. This option was supported by 188 deputies. Another option was to hold a second referendum on the country's withdrawal from the EU. This initiative was supported by 268 parliamentarians, while 295 opposed. Previously, such ideas were categorically rejected by the House of Commons, with a much larger margin of votes.

If we compare the results of the March vote on the above proposals with tougher initiatives, the difference in the level of support is obvious. For example, for the option under the letter "B", that is, for the country's exit from the EU without signing any agreement, then only 160 deputies voted, while 400 parliamentarians opposed this idea at once. I think that additional comments are unnecessary here.

Thus, the GBP/USD pair currently has the potential for further corrective growth, at least to the level of 1.2200. The nearest resistance level is the Kijun-Sen line on the daily chart, which corresponds to the price of 1.2295.