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British Pound: USD/GBP (GBP=X) rattled by Boris Johnson and Hard Brexit rhetoric

British Pound: USD/GBP (GBP=X) rattled by Boris Johnson and Hard Brexit rhetoric

The British Pound remains weak in the face of heightened hard Brexit fears ahead of the second round of voting for the Conservative leader sip. Brexiteer Boris Johnson is currently a strong odds-on favorite to win the roll with some bookmakers pricing Johnson at a prohibitive 1/8 on with current second favorite Rory Stewart offered at 10/1. Indeed, it is mathematically possible that Boris Johnson could be announced as the new Tory leader today if none of the other 5 leadership hopefuls get the required 33 votes needed to keep the contest going. The result of the second round of voting is expected at 6pm today.

Sterling is now starting to price-in a potential Hard Brexit with Boris Johnson seemingly having the keys to No.10 Downing Street. Johnson has made it clear that he wants the UK to leave the EU on October 31 with or without a deal. As always in politics, there is wiggle room as Johnson has been saying recently that he would prefer a deal with changes made to the current Withdrawal Agreement to enable it to pass through Parliament. The EU however remain firm that no changes will be made, leaving Johnson in the same position as Theresa May.

With a Hard Brexit becoming fractionally more probable, and with another few months of haggling with the EU fully expected, Sterling is taking the brunt and heading back towards 2019 lows against the US dollar. It is likely that Sterling will weaken further before any turnaround occurs. The one factor that may prevent GBPUSD dropping sharply is tomorrow’s FOMC meeting where Fed Chair Powell is expected to point to a 0.25% US interest rate cut at the July meeting, the first of 2 or maybe even 3 rate cuts expected in the US this year.

A look at the daily GBPUSD chart shows the January 2 low print at 1.2435 remains vulnerable. If broken convincingly, GBPUSD would be back at levels last seen in April 2017 and may attempt to break the March 2017 swing-low at 1.2110. The CCI indicator does show the pair in oversold territory and this may act as a brake on further downside momentum.

Overall, the bias in prices is: Downwards.

The projected upper bound is: 1.27.

The projected lower bound is: 1.24.

The projected closing price is: 1.26.

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 18 white candles and 32 black candles for a net of 14 black candles.

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 10.7252. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 17 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 34.17. 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 12 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 -149.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 6 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 0 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed up 0.003 at 1.256. Volume was 32% below average (neutral) and Bollinger Bands were 47% narrower than normal.

Open High Low Close Volume___
1.253 1.256 1.250 1.256 108,634

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

Moving Averages: 10-period 50-period 200-period
Close: 1.27 1.28 1.29
Volatility: 6 6 10
Volume: 131,736 143,896 173,237

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 2.9% below its 200-period moving average and is in an downward trend. Volatility is 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 24 periods.

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