GBP/USD rocketed higher after British Prime Minister Theresa May shocked markets by first making an unscheduled announcement and then calling a June 8 election.
Prime Minister May alerted the people that she has recently and reluctantly come to the decision that it is in the national interest that an election must be called at this time. This of course follows what can only be described as a bitter 12 months of political bickering between the left and right following the Brexit referendum vote.
"Division in Westminster will risk our ability to make a success of Brexit. …so we need a general election and we need one now."
"Our opponents believe because the government’s majority is so small, that our resolve will weaken and that they can force us to change course."
As you can see from some of these key Theresa May quotes as she called for the election, in her eyes this is about trying to gain political stability.
But what about market stability?
Well, we’ve been watching a higher time frame, 800 or so pip range and an internal GBP/USD wedge. The post-Brexit drop range is pretty straightforward and as such is a lot more important than a short term wedge that I’ve re-drawn to match actual market movements since.
GBP/USD Daily:
The GBP/USD range is clear as day on the daily chart and for me, the breakout and close above is the most important technical aspect of last night’s election announcement.
GBP/USD 4 Hourly:
Zooming into an intraday chart, you can really see the move higher that the news caused.
Price is no doubt going to pullback from here because when you actually stop and think about it fundamentally, this isn’t a GBP positive no brainer like that sort of move higher might suggest.
How price reacts when it retests the top of the previous range resistance as possible support is going to be the key battleground and a great spot for us day traders to manage our risk around.
