Brexit Deal is "Fingertip Close"

Brexit headlines have been in the driver’s seat

Brexit headlines have been in the driver’s seat as far as the Great British Pound is concerned.  As my colleague Ken Odeluga wrote earlier, it looks like the coming hours will tell whether pullbacks of the pound and related assets will gather pace.    Throughout the day, more and more headlines have come out, which in this case, are continuing to push Sterling to higher levels.  Although there will not be a deal today, it appears negotiators are close to an agreement. The latest developments are as follows:

  • UK Cabinet Minister say the Brexit deal is “fingertip close” (Daily Mail)
  • EU27 ambassadors have been told that all issues have been agreed, except the VAT (Buzzfeed)
  • French President Macron says an agreement is being finalised (Reuters)
  • According to the Guardian, ERG Chair Steve Baker said the EU leaders need to see the treaty text.  If will be difficult for them to endorse at the summit without the text, however they will continue working throughout the night.

The two most affected currencies of a Brexit deal (or lack of a deal) are the Euro and the Pound.  On a daily chart, EUR/GBP has been trading lower since the August 12th highs at .9324.  Once price fell to horizontal support and the 61.8% retracement from the May 6th lows to the August 12th highs, the pair bounced to the 38.2% retracement level and the psychological resistance near .9000.  In an almost textbook patterning, price broke lower, forming a flag formation which targets .8490, the May 6th lows.  Price fell relatively quick over the last few days and put in a marginal new low today.  Along with a close to oversold RSI, bears are hoping the pair may be due for a bounce towards the .8785 level where they can add to short positions. 

Source: Tradingview,

On a shorter-term time-frame, the RSI shows just how oversold EUR/GBP actually is, AND it is diverging from price, an early indication the pair may bounce. Price has also formed a falling wedge pattern.   If price were to break out higher from the falling wedge, the target would be a 100% retracement of the wedge, which is .8810.  This level coincidentally (or not) also happens to be the 50% retracement from the highs on October 10th to todays lows.  Horizontal resistance comes in just below that there at .8787.  Support comes in at the May 6th lows at .8490 (which is also the target for the flag pattern on the daily).  Below that, price can drop all the way to horizontal support from 2016 and 2017 near .8300 (not shown).

Source: Tradingview,

It appears now that a Brexit deal is in sight, however be aware that when a something is considered 99% done, that 1% seems to find a way of potentially messing things up!

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 or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account