British Pound: USD/GBP (GBP=X) to be moved by Brexit news

British Pound: USD/GBP (GBP=X) to be moved by Brexit news

British Pound: USD/GBP (GBP=X) to be moved by Brexit news

The GBP/USD exchange rate is trading at 1.2644 at the start of the new week after rising 2.54% in the week before. Studies of the charts suggest the pair is at an important crossroads with further upside dependent on a clear break out of the down channel.

However, Brexit headlines will continue to be the primary driver of Sterling and therefore we expect substantial volatility.

Traders will watching the EU Council summit that runs from Thursday 17th to Friday 18th to see whether a Brexit deal can be struck between the EU and UK.

The Pound surged on reports last week that the two sides were getting closer to agreeing a deal; if they finally reach an agreement the gains will likely continue.

A failure to agree a deal would however probably see the Pound give back some, if not all, of its recent gains as the future of Brexit and UK politics are once again thrown up in the air. Therefore, the promise of volatility over coming days is high and we warn against complacency.

Of course, achieving a Brexit deal between the UK and EU is only half the equation: that deal must then be voted through Parliament on Saturday’s sitting.

Numbers are extremely tight, and all Prime Minister Boris Johnson’s allies, and some opposition party MPs must vote for the deal if it is to pass and finally put the uncertainty of the past three years to bed.

We will be waiting news through the course of the week as to whether Northern Ireland’s unionist DUP – key allies of the Conservative government – will back a new deal based on its provisions for the Northern Ireland border. We feel if they are on board then most of the ‘Brexiteer’ MPs that voted against Theresa May’s deal could come on board too.

A rejection by the DUP would almost certainly leave any deal that comes back to Parliament ‘dead in a ditch’, as the saying goes.

This would be a significantly negative turn of events for Sterling and readers should be aware that such a headline could come through at any point during the week.

If we were to strip out the Brexit imponderables and looked at the GBP/USD from a purely technical perspective, we can see potential for the exchange rate to go as high as 1.30.

The daily chart shows how the pair has risen up to the top of the long-term falling channel and also the 200-day moving average (MA) at 1.2711.

These are likely to present a tough resistance duo capping further gains, making it difficult for the pair to break clearly out of the channel.

A move above 1.2800 would, however, provide strong confirmation for a continuation higher to a target at 1.3160 in the medium-term.

Alternatively, it is also possible the pair might find resistance at the top of the channel as too tough to break and fall back down inside the channel.

Such a move might find support in the 1.22-1.23 range.

The daily chart is used to analyse the medium-term trend, which is the next week to month of price action.

Technical Indicators

Overall, the bias in prices is: Upwards.

The projected upper bound is: 1.28.

The projected lower bound is: 1.24.

The projected closing price is: 1.26.

Candlesticks

A black body occurred (because prices closed lower 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 24 white candles and 26 black candles for a net of 2 black candles.

A bearish harami occurred (where the current small black body is contained within an unusually large white body). During an uptrend (which appears to be the case with FOREX GBP=) this pattern implies an end to the rally as the bulls appear to have exhausted themselves.

During a downtrend the bearish harami pattern is bullish as the bulls appear to be gaining strength as the bears weaken.

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 86.1433. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 2 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 64.56. 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 42 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 220.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 2 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 1 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed down -0.004 at 1.261. Volume was 99% below average (consolidating) and Bollinger Bands were 30% wider than normal.

Open     High      Low     Close     Volume___
1.262 1.265 1.260 1.261 1,583
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 1.24 1.23 1.27
Volatility: 15 12 10
Volume: 94,800 113,499 142,351

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 0.8% 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 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 0 periods.

The following two tabs change content below.
HEFFX has become one of Asia’s leading financial services companies with interests in Publishing, Private Equity, Capital Markets, Mining, Retail, Transport and Agriculture that span every continent of the world. Our clearing partners have unprecedented experience in Equities, Options, Forex and Commodities brokering, banking, physical metals dealing, floor brokering and trading.

Latest posts by HEFFX Australia (see all)