GBP was the biggest G10 currency mover: What do we have underhood?
The EURGBP plunged sharply losing 1.50% on August 22 as traders’ sense something solution to the Irish border issue. The pound rose between 1.00-1.50% against the most traded currencies and was the biggest G10 currency mover overnight.
We have been long GBP versus AUD, CAD, CHF and USD since this Monday, as we judged that 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. The latest news has been supporting the pound across the board.
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.
On Wednesday German Chancellor used her first face to face meeting with Boris Johnson.
The Guardian reported, “Merkel gives Johnson 30 days to find a solution to avoid no-deal Brexit”. Meeting after Merkel now the UK Prime Minister continued with the European tour. On Thursday Boris Johnson entered the Alizee palace to come face to face with Emmanuel macron.
Speaking to the media, Johnson said, “I think we can get a deal and a good.” The market read the news as a positive development.
Will the latest 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.
This Monday’s long GBPAUD, GBPCAD, GBPCHF, and GBPUSD position is in the money, and we are holding it to the weekend. GBPAUD has been holding up well. Whereas long EURGBP view has filed.
Earlier update: GBP insights
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Coming to the EURGBP, the cross closed tad below 50MA but manages to hold the three-month ascending trendline. The four-hour chart suggests that the selling pressure is likely to continue in the short-term and advised using sell on a rise strategy as long 0.9185 is resistance.
Below 0.9000 the next lower supports to be watched at 0.8950 and 0.8890. We feel that the present strength of the downside momentum is not likely to reverse completely unless the market sees a no-deal Brexit headline. If the cross starts moving upward, key resistance levels to watch out for are 0.9100 and 0.9150.
In the present context, any upside bounce from 0.9025/0.9000 could be an opportunity to sell on a rise.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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