British Pound: USD/GBP (GBP=X) just can’t catch a break

British Pound: USD/GBP (GBP=X) just can’t catch a break

The British Pound finds itself under pressure once more in the approach to the end of what has been a tough month for the currency.

The fresh declines, which come after a four-day hiatus from the month-long selloff, come admist the latest set of Brexit developments.

Currency markets will be digesting news the Labour Party’s position on a second referendum has, in fact, not changed after days of speculation and that a German veto to any further extension of Brexit is likely.

Perhaps the most significant of the two is the breaking story from the Telegraph’s Brexit and Europe Correspondent James Rothwell who says there will almost certainly be no extension to Brexit from beyond October 31.

“I’m told Germany will veto an extension to Article 50 at the next EU summit in October unless the UK makes major progress, such as announcing a general election or a second referendum,” says Rothwell.

It is reported that another extension would be granted only if it were to allow for a second EU referendum.

This is significant in that perhaps the only sure-fire way for Parliament to prevent a ‘no deal’ Brexit is to delay it.

There is an assumption that because there is a Parliamentary majority against a ‘no deal’ Brexit that such an outcome cannot come to pass. Over recent months the expression of Parliament’s will to avoid a ‘no deal’ has been via the commanding of Theresa May’s government to seek an extension to the Article 50 process.

Well, if Parliament can’t vote to extend Brexit then it becomes increasingly difficult to see what power Parliament actually has to prevent a ‘no deal’.

Therefore, if these reports are true then the odds of a ‘no deal’ have certainly increased.

This should weigh on Sterling going forward we believe, or at least keep any recoveries capped.

The Pound-to-Euro exchange rate has fallen from levels above 1.17 at the start of the month to quote in the 1.13s at present, a decline that is widely seen as being as a result of the realisation that a negotiated Brexit deal was not likely.

The Pound-to-Dollar exchange rate has meanwhile fallen from a high of 1.3177 down to current levels at 1.2627.

“The Pound just can’t catch a break. No-deal Brexit fears continue to weigh on Sterling, whilst Dollar strength looks to be the catalyst for dragging it lower,” says Neil Wilson, analyst at Markets.com. “This afternoon the Pound slipped under the May 23rd trough to its lowest since January ahead of the 4pm fix, before paring some of the losses.”

Overall, the bias in prices is: Downwards.

By the way, prices are vulnerable to a correction towards 1.28.

The projected upper bound is: 1.27.

The projected lower bound is: 1.25.

The projected closing price is: 1.26.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 17 white candles and 33 black candles for a net of 16 black candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 16.0079. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 5 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 27.66. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 5 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -100.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 5 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 14 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed up 0.000 at 1.261. Volume was 97% below average (consolidating) and Bollinger Bands were 57% wider than normal.

Open High Low Close Volume___
1.261 1.261 1.260 1.261 4,069

Technical Outlook
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 1.27 1.30 1.30
Volatility: 4 7 10
Volume: 128,123 151,540 174,659

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX GBP= is currently 2.6% below its 200-period moving average and is in an downward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect moderate flows of volume out of GBP= (mildly bearish). Our trend forecasting oscillators are currently bearish on GBP= and have had this outlook for the last 12 periods. Our momentum oscillator is currently indicating that GBP= is currently in an oversold condition.

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