15.11.201820:06 Forex Analysis & Reviews: Global macro overview for 15/11/2018

The departure of Dominic Raab from the government secretary for Brexit is a powerful blow to Prime Minister May. He was responsible for negotiating the deal, which he now officially criticizes and which he "can not support with a calm conscience". Raab's decision increases the risk of a motion of censure against Prime Minister May, but it does not prejudge its overthrow.

Raab's behavior is similar to the earlier decision of Boris Johnson in July when approving the government's strategy for Brexit negotiations, the so-called "Checkers plan". It is likely that Raab is preparing to face May in the fight for leadership in the Conservative Party, and opposition gains the favor of the hardened Eurosceptics in the Tory ranks.

However, Prime Minister May's move away from power and torpedoing the Brexit project will not be easy. A vote of no confidence can be raised if 15 percent. parliamentarians from the Conservative Party, ie 48 deputies, will send a letter requesting a vote of no confidence in the chairman of the so-called "1922 Committee", which consists of party members who have no position in the government. Press reports suggest that a sufficient number of letters will be collected, although some of them are conditionally submitted in the Committee - they can be used only if the member confirms his willingness.

After that, the ordinary majority of parliamentarians of the Tory Party (159) must vote against the prime minister. The appeal of May means the election of a new leader of the party, which is connected with the tedious process of selecting candidates, during which each day one of them will be rejected by two votes. Then, a postal vote is made of all members of the Conservative Party, which may take several weeks.

The dismissal of the government does not mean immediately accelerated general elections but clearly increases their risk. If May wins the vote of no confidence, he can not be subjected again for a year.

Let's now take a look at the GBP/USD technical picture at the H4 time frame. The market reacted very negativley to the news and the technical support at the level of 1.2828 was violated. The market has made a new local low at the level of 1.2775, just above the technical support at the level of 1.2770. This support zone might be tested very soon as the momentum is weak and negative. Moreover, from the weekly time frame point of view the downtrend might just have resumed its move lower towards the levels of 1.2700 and 1.2659.