The Brexit, The Pound, And Your Trading

October 18, 2022

Brexit Looms, Fears Increase, BOE In The Wings

In unaccented of recent events I find it is timely for me to review the pound and hammer-based trading pairs. The EU and UK negotiators announced a new Brexit deal conscionable a day or two ago and in this time a serious rally in the pound hit a wall. On one hand positive developments regarding the plenty and a in renegotiation hold strengthened the pound. Along the other, opposition in Parliament and a "buy the word sell the reality" mentality is setting in. Yes, a velvet Brexit will comprise salutary the UK economy and the pound but none, information technology is not expected to make a cloth difference in the GB's economic outlook. Status quo will be maintained.

The status quo at this time is shaky economic fundamentals, slowing orbicular growth, and arithmetic mean for important bank stimulant. The BOE is among those expected to cut rates, add stimulus, or leastwise step up in favour of economic support. The bad news for the BOE is that their next policy meeting is non until after the 10/31 Brexit Deadline and IT is a 100% certainty the outcome of that event will sway their conclusion. Before that nonetheless, is the ECB meeting.

The ECB is slated to meet incoming calendar week and also bears a high outlook to create stimulation. The EUR/GBP has been in a downtrend the past few weeks and may go lower … if the ECB exceeds the markets expectations. The problem with the chart is that the spic-and-span down is divergent from MACD and random which is a signaling I do not like to ignore. This divergence suggests there leave be at least a rebound/retest of resistance that could take the pair up to the 0.88385 tear down. Add to this a bullish crossover in the stochastic and the odds of rebound over the next week increase. If the ECB fails to meet expectations I would await a Thomas More solid rally therein pair.

The GBP/USD graph is a near mirror-image of the EUR/GBD with unity major difference. The MACD peak is merging with the new high which suggests this rally may deliver legs. The FOMC is also expected to cut rates and that is what's driving the move, the uncertainty stems from how much and when the committee will do thus. It may constitute at the next meeting which is regular for 10/30, the day before the expected Brexit. A retest of 1.3000 is very possible, if not likely. A move above 1.3000 would constitute bullish and whitethorn take the pair adequate 1.3600.