- The pound traders braces for the latest development of Brexit
- EURGBP rebounds before the Parliament vote
Today at 20.00 CET, the UK Parliament is due to debate on Theresa’s Plan B. Over the past three weeks, Pound rose more than 3.50% against the euro, and the cross ran through the targets we set the other week.
Now, we shifted our view from bearish to limited downside approach, and we look for a range trading behavior between 0.8550-0.8900 in this week.
Market participants braces for today’s Brexit vote at 20.00 CET and the market is pricing for “Brexit delay.”
On today’s Brexit vote, Danske Bank comes up with two assumptions. “At the moment, the two most important amendments are the Cooper amendment and the amendment by the top of the so-called 1922 Committee of the Conservative Party.”.
In a note to client Senior Analysts Mikael Olai Milhoj and Morten Helt said “We maintain our call that the two most likely outcomes are either May’s deal (or something very similar) passing at a later stage as pressure builds on the politicians or a second EU referendum (40% and 30%, respectively). “
Morgan Staley penciled Brexit deal likely. In a note, MS said, “For the moment, we assume a one-quarter extension to the Article 50 negotiating period, given the complexity of the UK participating in the new European Parliament which takes its seats on July 2.”
During the recent rout, the euro cross fell dramatically from its Dec 2018 high, what we forecasted a double top in early Jan 2019. Since our forecast, the cross fell more than 3.50% and manage to hold the parallel support finds at 0.8620 its mid-April 2018 low.
On the weekly chart, the support zone remains between 0.8650-0.8620. There have been four occurrences including last week’s fall where the price action rebounded. Note that a break below these levels would underpin further bearish momentum, paving the way for a decline to the next support 0.8350 its 200MA (Monthly) and 0.8300 its 100MA (Weekly) coincides with the 50.0% fib reaction. Resistance stands at 0.8730 above here focus shifts to 0.8790/0.8800 and 0.8830.
The pound has already appreciated against the most traded currencies and also ran through the targets on EURGBP, GBPJPY, GBPAUD, GBPCAD, and GBPNZD.
Ahead of today’s Parliament vote the cross the cross likely to trade between 0.8620-0.8725. Moreover, the daily RSI has picked up markedly from the oversold level of 26, and the oscillator is about to change the behavior to bullish. Based on these facts, we forecast the balance of power is tilting in favor of limited downside in the near-term.
Hence, we favor a limited downside approach to 0.8550-0.8500 in the near-term.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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