British Pound: USD/GBP (GBP=X) expected to be the most volatile

British Pound: USD/GBP (GBP=X) expected to be the most volatile

British Pound: USD/GBP (GBP=X) expected to be the most volatile

The latest Brexit drama is already rattling UK Parliament so far this week with news that House of Commons Speaker John Bercow will step down from his post. More importantly, markets await another vote by British MPs on whether or not to support PM Boris Johnson’s call to hold a snap general election scheduled for late Monday. While MPs already rejected PM Johnson’s motion to call a general election last week, Parliament subsequently passed a bill that now requires the Prime Minister to request another Brexit deadline extension to prevent the UK’s no-deal departure from the EU.

Now seeing no-deal Brexit as a less-pronounced risk, a snap general election may garner enough support from the UK government’s opposition led by Labour Party’s Jeremy Corbyn. GBPUSD has skyrocketed so far this month owing to the reduced likelihood of no-deal Brexit, but the possibility that British MPs might approve Monday’s motion to hold a general election remains a daunting downside risk to the Pound Sterling. Furthermore, UK Parliament will be prorogued – or suspended – after Monday’s business is concluded for roughly a month. It is worth pointing out that the sharp rally in British Pound can be largely attributed to forex traders unwinding GBPUSD short positions suggested by the latest CoT report detailing speculative positioning.

That said, another influx of Brexit uncertainty and rise in the probability of no-deal could spark another surge in GBPUSD short positions which stands to send spot prices whipsawing back lower. Even in the event no general election is held and PM Boris Johnson is legally obligated to request another Brexit delay beyond the current October 31 deadline, the appeal requires unanimous approval from the EU27 who have already voiced concerns over UK “can-kicking.”

Nevertheless, GBPUSD is expected to be the most volatile US Dollar currency pair out of majors. In fact, GBPUSD overnight implied volatility of 9.59% in in the top 70th percentile and above its 12-month average reading of 8.50%.

Technical Indicators

Overall, the bias in prices is: Sideways.

The projected upper bound is: 1.25.

The projected lower bound is: 1.22.

The projected closing price is: 1.23.

Candlesticks

A white body occurred (because prices closed higher 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 22 white candles and 28 black candles for a net of 6 black candles.

An engulfing bullish line occurred (where a white candle’s real body completely contains the previous black candle’s real body). The engulfing bullish pattern is bullish during a downtrend. It then signifies that the momentum may be shifting from the bears to the bulls.

If the engulfing bullish pattern occurs during an uptrend (which appears to be the case with FOREX GBP=), it may be a last engulfing top which indicates a top. The test to see if this is the case is if the next candle closes below the top of the current (white) candle’s real body.

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 88.9072. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 4 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 57.61. 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 17 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 121.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 3 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 buy 17 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed up 0.006 at 1.234. Volume was 8% below average (neutral) and Bollinger Bands were 8% narrower than normal.

Open     High      Low     Close     Volume___
1.227 1.238 1.223 1.234 115,508
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 1.22 1.23 1.27
Volatility: 12 10 9
Volume: 124,399 118,400 151,545

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 3.2% below its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect moderate flows of volume into GBP= (mildly bullish). Our trend forecasting oscillators are currently bullish on GBP= and have had this outlook for the last 10 periods.

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