British Pound: USD/GBP (GBP=X) Merkel-Johnson phone call leaves talks teetering on failure

British Pound: USD/GBP (GBP=X) Merkel-Johnson phone call leaves talks teetering on failure

British Pound: USD/GBP (GBP=X) Merkel-Johnson phone call leaves talks teetering on failure

Pound Sterling has suffered a sharp bout of volatility amidst reports that talks between the EU and UK have effectively been killed off by Germany’s Angela Merkel. However, we caution that it is too early to write Sterling off as the two sides continue to negotiate amidst the headline drama, and if they are still engaged by next week’s EU Council summit then a deal becomes highly likely.

Sterling took a dip Tuesday on media reports a morning call between Prime Minister Boris Johnson and German Chancellor Angela Merkel signalled negotiations were on the brink of failure, with a Downing Street source telling reporters that Merkel told Johnson there will be no Brexit deal unless Northern Ireland remains in the customs union “forever”.

“Number 10 source says she said there could only be a deal if Northern Ireland stays in Customs Union, if not, then deal is ‘overwhelmingly unlikely’,” says BBC Political Editor Laura Kuenssberg.

The source says she repeated “forever” on “multiple occasions”.

This is clearly a request the UK would not accept under its current negotiating position, as it would split the United Kingdom. It therefore looks like an agreement with the EU will be unachievable, now or in the future unless the political cards are shifted in the UK.

“Johnson will now go full steam ahead to a no-deal Brexit on 31 October. I would expect him to make a statement about all this later today,” says Robert Peston, Politics Editor at ITV.

For Sterling, the prospect of ‘no deal’ expectations rising pose notable downside, and the balance of probabilities suggest the easiest route forward ins lower. “With very little common ground, there appears to be very little benefit in continuing to negotiate. A no deal is the most likely outcome, both sides will now focus their attentions on a blame game and finding the culprit,” says Artur Baluszynski, Head of Research at Henderson Rowe.

The Pound-to-Euro exchange rate is now at three-week lows at 1.1146, those with currency payments will see the rate on offer at banks now down to 1.0850-1.0930, independent providers will be quoting towards 1.1050.

The Pound-to-Dollar exchange rate is down at 1.2244, banks are quoting around 1.1914-1.20, specialist providers at around 1.2150.

Technical Indicators

Overall, the bias in prices is: Downwards.

The projected upper bound is: 1.24.

The projected lower bound is: 1.20.

The projected closing price is: 1.22.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 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 21.1418. This is not an overbought or oversold reading. 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 41.25. 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 39 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 -119.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 4 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 10 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed up 0.000 at 1.222. Volume was 99% below average (consolidating) and Bollinger Bands were 2% wider than normal.

Open     High      Low     Close     Volume___
1.222 1.222 1.222 1.222 747
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 1.23 1.23 1.27
Volatility: 4 9 9
Volume: 93,285 114,140 142,943

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 3.9% 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 4 periods.

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