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British Pound: USD/GBP (GBP=X) May pitches new Brexit deal

British Pound: USD/GBP (GBP=X) May pitches new Brexit deal

The British Pound is staging a relief rally on Tuesday, May 21 as markets digest the details of  Prime Minister Theresa May’s new Brexit deal. However, the currency’s move higher is not expected to extend significantly amongst a distinctly negative reaction to her latest offer from members of her Conservative Party.

The Pound rallied sharply as reports came through that May was poised to offer MPs a vote on a second EU referendum.

However, in a speech this afternoon May says she “does not believe this a route we should take,” but that the Government will include in the Withdrawal Agreement Bill a requirement to vote on whether to hold a second referendum.

Therefore, those MPs who want a second referendum must first pass the Brexit deal first.

“Today I am making a serious offer to MPs across Parliament: a new Brexit deal,” says May.

May says the new deal will place the government under a legal obligation to find alternatives to the Northern Irish backstop, to ensure it never comes into force.

This pitch is aimed at securing the support of Northern Ireland’s DUP whose votes May needs to pass her deal. The DUP have long been wary that the Backstop would cleave Northern Ireland away from the rest of the UK.

May has also committed to protecting the rights of UK workers following Brexit: a key demand made by Labour negotiators.

In order to deliver this, May is proposing the passing of a Workers’ Rights Bill.

Further, environmental safeguards and standards will also be guaranteed.

On the contentious issue of Labour’s demands for entering a Customs Union with the EU, May says she is prepared to commit into law to allow parliament to decide on the issue of a temporary Customs Union.

Further reports suggest May is to offer MPs a vote on a choice of EU customs arrangements.

The new plans are seen as an attempt to secure the support of the Labour Party to finally pass a Brexit deal: Labour have made entering a customs union and a confirmatory vote the price of backing any deal.

The Pound clearly likes the developments as it sounds like May has moved decisively towards Labour’s demands, and therefore it has a shot of passing through parliament.

Should the political reaction to the new deal suggest to markets it has a chance of ratification then we would expect Sterling to reverse some of its recent losses as markets price in the prospect of some kind of deal eventually being passed by the House of Commons.

“The Pound is reacting to Mrs May’s potential ‘New Brexit Deal’ like it was Roosevelt’s New Deal,” says Viraj Patel, a foreign exchange strategist with Arkera in London. “Let’s not get carried away. GBP bulls have been this party & burned too many times. Has to be some serious changes to the deal make the UK parliamentary arithmetic add up.”

Overall, the bias in prices is: Downwards.

By the way, prices are vulnerable to a correction towards 1.29.

The projected upper bound is: 1.28.

The projected lower bound is: 1.25.

The projected closing price is: 1.27.

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 19 white candles and 31 black candles for a net of 12 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 9.0234. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 12 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 28.37. 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 sell 59 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 -108.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 11 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 7 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed up 0.000 at 1.271. Volume was 98% below average (consolidating) and Bollinger Bands were 36% wider than normal.

Open High Low Close Volume___
1.270 1.271 1.270 1.271 2,668

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

Moving Averages: 10-period 50-period 200-period
Close: 1.28 1.30 1.30
Volatility: 4 8 10
Volume: 120,228 157,292 175,439

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 1.9% below its 200-period moving average and is in an downward trend. Volatility is relatively normal 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 5 periods. Our momentum oscillator is currently indicating that GBP= is currently in an oversold condition.

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