Here is what I think for the sterling ahead of meaningful vote on 11 DEC.
First let’s review the Monthly GBPUSD . Look at the wick of the NOV candle which was closed yesterday. Also remember that it never made a lower low since AUG. I can say there are a lot of SLs resting at 1.2662 (AUG Low) and I expect an sharp move lower once Bulls SLs hit. I do not see any Support for GBPUSD until 1.986. But this would be like 5.5% move and I doubt without an underlying fundamental cable drops this much. So what is the plan?
Sam Gyimah’s Resignation right after the close can break the support the major support at 1.2696 and eventually 1.2662 where the move just going to start. Once the support breaks, the next level of support is at 1.2589 (JAN 2017 Low) and 1.25 the logical number.
To be more precise we have 1.25027 as the 61.8% Fib extension of the Brexit move and that offers exactly 2% move from where GBPUSD is right now. That is where bears may take profit and reload at the higher price again for a new short.
Sterling equally weighted average broke the support on Thursday but there was no follow through. See how nicely the monthly candles pulling back after visiting 14 and 21.
Sterling 10 years Yields also on Friday after 3 years broke the rising and closed below it although the look of that candle is not convincing.
Also see the beautiful inverted on UK Bonds. Negative correlation is expected.
Most of the Sterling crosses look very attractive for shorting. See GBPAUD below. If it breaks this support it can drop by 4.7%. Here is the monthly chart
Same as GBPCAD . See how the last 3 months it is rejecting EMAs
Perhaps the most attractive one after Cable is GBPCHF . See the beautiful set up here
And I think the massive drop in GBPNZD has another 12% to materialize in the coming months.
BUT although any good news for Sterling is going to offer short term rallies but something like a referendum can totally change the scenario and Sterling can be a great long. I think on that scenario GBPJPY is the best cross to be long.
Finally as I am short on GBPUSD , I would like to review USD markets too. See DXY below. Although the comment by Powell was dovish on Wednesday but that totally faded for a simple reason, Support is support until otherwise observed. This is the monthly chart.
and this is the weighted average USD (weekly). I do not call it a bull market as it is at resistance but also at the same time it is above a major Fibo and DXY also is on the long side.
You cannot be long on USD unless you are short on EURUSD . See the monthly EURUSD , it nicely rejected the EMAs and heading into the rising . NOV closed as but overly this market is .
Finally IG client sentiment shows retailers are over 70% on GBPUSD and this is a signal for cable.
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Dr . Ehsan Khansalar