Markets seem to have spent the last few weeks packing their bags for the no-deal Brexit. Aside from digesting a few more technical related insights, the lack of any negative news flow on Brexit is positive to GBP at the current scenario for the time being.
Finally, the GBP halted the losses against its G10 counterparts. The GBP crosses and majors lost more than 10% each this year. Whereas since last week, the GBP witness some strength against majors and crosses as well, led by oversold indicators.
Last week’s price action is indicating a somewhat limited downside risk.
Latest news flow: Over the weekend, the latest Brexit news flow could help the pound to bounce further.
“Brexit Secretary signs the order to scrap 1972 Brussels Act – ending all EU law in the UK” reported by Gov.UK.
Department for exiting the European Union reported that “The repeal of the European Communities Act 1972 will take effect when Britain formally leaves the EU on October 31.”.
Brexit Secretary Steve Barclay said after signing the legislation that will crystallize in law the upcoming repeal of the ECA, “This is a clear signal to the people of this country that there is no turning back – we are leaving the EU as promised on October 31, whatever the circumstances – delivering on the instructions given to us in 2016.”
Read the full story: Gov.uk
Morgan Stanley said “Brexit pathways lead most likely to an orderly resolution”
In a research note today, Morgan Stanley said “We see a lower probability of a no deal Brexit (40%) than of an orderly resolution (60%), which we define as either Brexit on the basis of a negotiated deal (20%) or a decision to remain in the EU (40%). Although we still see it as unlikely, we have increased the probability of a no deal Brexit on October 31 from 5% to 15%, reflecting the new UK government’s uncompromising stance in rejecting the Irish backstop, and willingness to pursue a no deal outcome.”
FX insights: Last Friday the cable spiked through the narrow range and had entered into a new era. We forecast a bullish target for 1.2180/1.2200 with a low conviction. Now the conviction rate has grown higher.
#GBPUSD just spike through the current range, up by 0.70% and trading at 1.2140.
Support finds at 1.2100, 1.2050 and 1.2000. As long as 1.2040 holds watch out for 1.2180/1.2200 (low conviction) #FX初心者 #fxトレーダー pic.twitter.com/rXyHTM9MvG
— KeytoMarkets (@KeytoMarkets) August 15, 2019
Now the resistance zone remains at 1.2200 ahead of another resistance at 1.2250. A decisive close above 1.2250 could open the door for a move towards 1.2400 levels.
Flipside supports located at 1.2100 and 1.2040 below here 1.2000/1.1985 exists.
Besides, GBPAUD settled above 20MA and aiming at early August high at 1.8200. As long as 1.7700 supports, watch out for 1.8200. Note that immediate resistance zone remains between 1.8000-1.8040 levels. A decisive break above could open the door towards 1.8100 and 1.8200.
Will the bounce last -long is the crucial question? We sense that current positive sentiment is not a permanent game-changer unless we get a clear picture of the Brexit.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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