Brexit countdown starts; time for GBP/USD to… rally?
Fawad Razaqzada March 29, 2017 8:02 AM
In a historic moment today, Theresa May has delivered the UK exit letter to her European Union colleagues, officially starting the Brexit process today. With so much uncertainty hanging over the UK economy, it is logical to think that the pound could remain under pressure. Well, that may well be the case in the long-term, as after all Scotland’s future in the UK is becoming increasingly questionable. But in the short-term, sterling could be on the verge of a massive short covering rally. It is unlikely that governments within the EU would seek to punish the UK just because its people have decided that it should leave the union. Instead, the EU will likely hold constructive talks with the UK government to find a deal that would benefit both regions. The trigger behind a potential GBP recovery could be if speculators unwound the record high sterling short positions that they have been accumulating in recent months.
Consequently I am on the lookout for short-to-medium term bullish price patterns to form on the GBP/USD and other GBP pairs in the coming days. Currently, the cable is stuck within its wide 1.20-1.27 range. But is in the upper half and above the now rising 50-day moving average. A couple of higher lows have now been formed. Thus price action is already starting to look bullish, though while inside the range, expect to see further choppy price action as clearly a lot of people are still bearish on the pound. As before, our first bullish objective is the top of the range around the 1.2680/70 area, where we also have the 200-day moving average converging. But to get there, it will first need to clear some short-term resistance levels for example at 1.2480 and 1.2615. Otherwise, a deeper pullback may be on the cards before the potential rally.
Source: eSignal and FOREX.com
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.