Pound Rebounds As MP’s Reject No-Deal Brexit

It was another volatile session for GBP after MP’s rejected a no-deal Brexit, sending the pound broadly higher and reversing prior losses.

At its peak, GBP/USD was elevated to a 9-month high before settling back within the prior days range, 2% higher. GBP gained the most ground against NZD and USD, although it was only against AUD which it closed to a new cycle high. Regardless, volatility has certainly made its mark on GBP pairs the past 48-hours, with most pairs at least doubling their typical daily ranges over both sessions. 

To underscore the pick-up of volatility, EUR/GBP has seen 5 consecutive days with a range exceeding 1%, an occurrence not seen since November 2016. Moreover, each session this week has reversed direction. However, at some point a sustainable move must unfold.

With parliament due to vote and likely extend Brexit, GBP could retain its strength over the near-term as the can gets kicked down the road. Yet with the lack of any real solution, continued strength is also up for debate as, ultimately its direction remains in the hands of politicians. But, for now at least, technicals suggest downside pressure on EUR/GBP.

We outlined the potential for EUR/GBP to top out last Wednesday following its monthly close beneath 0.8260. Our bias remains bearish on the monthly structure, although volatility needs to pick its directional side before a sustainable move materialises. 

Price action remains beneath a bearish trendline on the daily chart, and a resistance zone between 0.8620 - 0.8676 is capping any upside. The zone comprises of the third lower high, prior support at 0.8620 and the 20-day average – which effectively means 0.8676 is pivotal for the analysis.

If resistance holds and we see a convincing break of 0.8472, bears would have 0.8300 in their sights. Whereas a break above 0.8676 takes us back within range and brings the 0.8840 high into focus.

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.

The markets are moving. Stop missing out.

Open an Account