Brexit negotiations are back in the forefront with negotiations deadlocked on two key aspects: 1) Fisheries, 2) Level playing field. No-deal Brexit risk is increasing as the deadline for an agreement is fast approaching. The deadline is October-31st, this gives the EU two months to ratify any deal, ready for January-1st.
The closer we get to October-31st without any meaningful progress, the risk of no-deal increases and risk premium will likely be priced in the UK assets. We already saw EURGBP rally to test 0.9300 in recent trade, it's likely these trends to continue into the back end of September/ mid-October.
The risk of a no-deal Brexit is higher now than it was in June 2019, when the currency was trading 1.2500 handle.
This comes at a time when the US Dollar index is over-sold on its weekly and monthly timeframes, suggesting any real further downside may be limited in the short term.
Technically, GBPUSD found resistance at major Daily level around 1.3000, post FOMC price rallied and failed at that area, and again today following the Bank of England where no change to policy was made. If the bears can gain momentum off this area, then the first key area is the September low/ June high (1.2815/1.2770) and the 200DMA (1.2730) and if the 200DMA breaks to the downside then the final targets would be near April/ May highs around 1.2641, or even potentially lower.
Weekly stochastics are still printing 65, which could indicate GBPUSD could also weaken further.
Risk is above 1.3040 giving the trade a five-to-one reward to risk ratio.
Depending on incoming data we can change our mind, we're certainly not married to this idea. Any positive developments we could flip the trade, but for now we like the look of this set up. If the US Dollar starts to weaken sharply again, could also hinder the downside on this pair.
The closer we get to October-31st without any meaningful progress, the risk of no-deal increases and risk premium will likely be priced in the UK assets. We already saw EURGBP rally to test 0.9300 in recent trade, it's likely these trends to continue into the back end of September/ mid-October.
The risk of a no-deal Brexit is higher now than it was in June 2019, when the currency was trading 1.2500 handle.
This comes at a time when the US Dollar index is over-sold on its weekly and monthly timeframes, suggesting any real further downside may be limited in the short term.
Technically, GBPUSD found resistance at major Daily level around 1.3000, post FOMC price rallied and failed at that area, and again today following the Bank of England where no change to policy was made. If the bears can gain momentum off this area, then the first key area is the September low/ June high (1.2815/1.2770) and the 200DMA (1.2730) and if the 200DMA breaks to the downside then the final targets would be near April/ May highs around 1.2641, or even potentially lower.
Weekly stochastics are still printing 65, which could indicate GBPUSD could also weaken further.
Risk is above 1.3040 giving the trade a five-to-one reward to risk ratio.
Depending on incoming data we can change our mind, we're certainly not married to this idea. Any positive developments we could flip the trade, but for now we like the look of this set up. If the US Dollar starts to weaken sharply again, could also hinder the downside on this pair.
Comment:
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