British Pound: USD/GBP (GBP=X) Johnson pauses quest to pass Brexit deal
The British Pound shed further ground against the Euro, Dollar and other major currencies on Tuesday night after Prime Minister Boris Johnson pressed the pause button on the progress of his Brexit deal through Parliament.
The House of Commons voted by a margin of 308 to 322 to reject the Governments programme motion, which is simply the timetable proposed by the Government to push the deal through Parliament.
Following the defeat, Johnson said he will pause attempts to pass the deal and await the decision of the European Union on whether or not they will grant an extension.
The Pound has rallied over recent days as markets increased bets that a Brexit deal would finally be passed by Parliament; pausing the progress of the deal therefore gives markets cause to book profit on the rally and await the next moves of the Prime Minister.
The defeat on the programme motion came after MPs approved the Withdrawal Agreement Bill (WAB) on a second reading by 329 to 299, which made for a bigger-than-expected majority for the deal.
Significantly, this is the first time a Brexit deal has been supported by Parliament, and we would expect the Government to return with a revised timetable that has a chance of allowing the Withdrawal Agreement Bill to finally pass into law.
The argument made by those MPs who would back the Brexit agreement, but not the timetable, is that there is not enough time to fully scrutinise the WAB’s 110 pages before Thursday, when the Government wanted to see the legislation passed by the House of Commons to the House of Lords.
Therefore, the Bill remains alive and the prospect of an orderly Brexit remains and under such circumstances we doubt the Pound will suffer significant losses.
Johnson has pledged to deliver Brexit by October 31, but the Benn Act, and now the defeat of the programme motion, makes such an outcome almost impossible.
Johnson’s reckoning is that he will suffer at the ballot box if he is seen to be breaking his steadfast pledge to deliver Brexit by October 31.
“A delay to Brexit now appears the most likely scenario and the chances of a near-term deal have diminished a bit. A short delay to finalise a deal would not be a blow to economic growth and the Pound, especially if it were followed by a deal that would eventually prompt both to rise. In that case, we suspect the Pound would climb pretty quickly,” says Paul Dales, Chief UK Economist with Capital Economics.
Dales however warns a longer delay to allow for a general election “would prolong the current uncertainty that is acting as a handbrake on the economy and holding down the Pound.”
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 1.25.
The projected upper bound is: 1.31.
The projected lower bound is: 1.27.
The projected closing price is: 1.29.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.
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 83.6947. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 8 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 68.48. This is not a topping or bottoming area. However, the RSI just crossed below 70 from a topping formation. This is a bearish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 0 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 91. This is not a topping or bottoming area. The last signal was a sell 0 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 buy 7 period(s) ago.
Rex Takasugi – TD Profile
FOREX GBP= closed down -0.008 at 1.288. Volume was 2% below average (neutral) and Bollinger Bands were 155% wider than normal.
Open High Low Close Volume___
1.296 1.300 1.286 1.288 115,171
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1.27 1.24 1.27
Volatility: 16 12 10
Volume: 121,718 116,676 141,607
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 1.3% above its 200-period moving average and is in an upward 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 bullish on GBP= and have had this outlook for the last 6 periods.