To Hold Elections or to Not Hold Elections?
Joe Perry October 24, 2019 4:46 PM
While the ongoing saga between Boris Johnson and Jeremy Corbyn continues, the markets are waiting to hear if the EU will grant an extension of a Brexit deal from the “drop dead” date of October 31st until some time in the future. As we wait, UK Prime Minister Boris Johnson called on MPs to vote for elections on December 12th. UK Labour Leader Jeremy Corbyn has rejected the request, however he did say “take no deal Brexit off the table, and Labour will absolutely support an election”. This fluid situation may change if the EU grants the extension. At this time, the most likely extension will be until January 2020.
But one must consider, is a Brexit deal the most likely outcome, as it may just be a matter of “when”? And if so, what does that mean for the GBP? Clearly, market participants did not like the day’s proceedings as GBP/USD is down -0.5% on the day near 1.2850. The pair is consolidating in a rather large resistance zone between roughly 1.2790 and 1.3012 and is holding above (retesting?) a major downward sloping trendline which come across near 1.2730.
Source: Tradingview, FOREX.com
On a 240-minute time frame, a flag formation is clearly visible as the RSI unwinds from overbought conditions. Depending on the timing of the breakout of the flag (and if it happens), the target could be near 1.3600. The pair has currently retraced to the 23.6% Fibonacci retracement level from the low on October 10th to the highs on October 21st. If GBP/USD holds above the 38.2% Fibonacci retracement level at 1.2705, it would be constructive for the pair. The 1.2705 level is also horizontal support. Below there is a support zone between the 50% Fib retracement level and the 61.8% Fib retracement level (1.2521/1.2613). If price breaks through 1.2520, we could be back down to the recent lows near 1.2200 in a hurry.
Source: Tradingview, 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.