British Pound: USD/GBP (GBP=X) Expect the Pound to be Volatile
The UK’s Brexit proposal would see the country effectively retaining full access to the EU single market for goods but losing access for services. It is closer to a “soft Brexit” than many had anticipated, angering some in the pro-Brexit camp.
The proposal reflects the UK government’s gradual realization that any alternative would be highly disruptive for the manufacturing sector and would leave issues surrounding its land border with EU member Ireland unresolved. The UK has shifted its stance on previously non-negotiable issues, such as accepting alignment with European regulations and judicial rulings. This allows talks to move forward for now. Yet there’s a major unresolved problem: The EU has stated that “cherry-picking” EU-membership principles to abide by would be unacceptable.
We see Brexit noise getting louder as the March 2019 date for the UK’s exit nears. The EU will need to decide if it’s willing to accept a tailored agreement. The alternative is forcing the UK to choose between a limited free-trade deal or full adherence to the EU’s four freedoms, including free movement of people, at the risk of a negotiation breakdown.
Our base case: Pressure to avoid a no-deal outcome leads to a compromise later this year. We expect an extended transition period starting in March 2019, with key future relationship decisions kicked down the road. We see nearer-term wildcards too, such as a possible leadership contest in the UK’s ruling Conservative Party.
Greater resiliency in portfolios is key amid Brexit volatility and other risks. We are underweight UK equities, and favor overseas earners that can benefit from faster-growing economies and currency weakness. We would avoid UK banks, which tend to be sensitive to Brexit news.
We prefer U.S. and emerging market (EM) equities on higher earnings growth. We do not expect UK government bond yields to rise materially amid political uncertainty. We see UK real estate fundamentals staying strong, but focus on the highest-quality assets. We expect the pound to be volatile, with potential downward pressure until a Brexit resolution nears.
GBP/USD remains stuck in a downtrend from the May high, with a push towards trendline resistance yesterday being defeated.
However, a move above $1.33 would break resistance, and then the $1.3350 area comes into play. A turn lower targets $1.31 and then $1.3040.
Overall, the bias in prices is: Downwards.
The projected upper bound is: 1.33.
The projected lower bound is: 1.29.
The projected closing price is: 1.31.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 25 white candles and 25 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 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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 33.1782. This is not an overbought or oversold reading. The last signal was a sell 7 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 37.54. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 13 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 -148.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 13 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 0 period(s) ago.
Rex Takasugi – TD Profile
FOREX GBP= closed down -0.000 at 1.311. Volume was 97% below average (consolidating) and Bollinger Bands were 45% narrower than normal.
Open High Low Close Volume___
1.311 1.312 1.310 1.311 4,466
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1.32 1.33 1.36
Volatility: 7 7 9
Volume: 157,933 166,549 152,556
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.
FOREX GBP= is currently 3.5% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of GBP= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on GBP= and have had this outlook for the last 0 periods.
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