Global macro overview for 10/10/2017:
The British Prime Minister Theresa May has outlined the contingency plans for leaving the EU without a deal. This scenario is known in financial media as "hard-Brexit", but this is the first time UK PM delivered a clear scenario regarding this situation. May said in the speech in British Parliment yesterday: "While I believe it is profoundly in all our interests for negotiations to succeed, it is also our responsibility as a government to prepare for every eventuality", which means the UK government was prepared to walk away from Brexit talks anytime without a deal. According to the document presented by UK PM, the legislation will create a new "standalone" system for the UK and ensure value-added tax and excise laws continue to function if the country crashes out of the bloc without a deal.
May intervention came at a sensitive time for the Brexit negotiations: this is the fifth round of talks and the deadline for the talks is just in 18 months. Boris Johnson, the Secretary of Foreign Affairs, welcomed the announcement and urged lawmakers to support her strategy as he said: "She (Theresa May) has reaffirmed the destination of a self-governing, free-trading, buccaneering and Global Britain taking back control over our laws, money, and borders."
The latest round of Brexit negotiations will end Thursday and are the last before EU leaders meet for a summit next week and will decide how talks should proceed. Before this will happen the British Pound might be supported across the board, especially against the two major currencies: USD and EUR.
Let's now take a look at the GBP/USD technical picture at the H4 time frame. The market has bounced from the technical support at the level of 1.3030 and now is testing the dashed black trend line from below around the level of 1.3181. Nevertheless, the key level to the upside is the resistance zone between the levels of 1.3220 - 1.3293, so as long as the price will stay under this level, the outlook remains sideways to bearish.
