Brexit Recent Talk Points:
- British Prime Minister Boris Johnson suffered defeat in UK courts today when a judge ruled he could not prophesy parliament – in other words, he could not suspend the UK parliament to reach any agreement, "Brexit claims."
- Refraining from fear of doing anything, "Brexit claims" – if only temporarily – is taking place with positive developments on the US and Chinese trade war fronts. Risky assets were auctioned higher, while low-yielding refugees lost ground.
- Retail trade trader positioning suggests that the British pound may be under more pressure in the last days of July.
Looking for longer term forecasts for The British pound? look DailyFX Trading Guides.
Ambitions of British Prime Minister Boris Johnson for a quick exit from the European Union today hit when British the judge ruled that he could not extend parliament – in other words, he could not suspend parliament in the UK to reach any agreement, "Brexit claims."
Economic data in the UK are softening as Brexit uncertainty is high
If only temporarily, fears of doing something, Brexit claims, have receded, while the rise of the path to economic collapse for the UK has slowed. Last week's UK GDP report for the second quarter was surprisingly weak, with quarterly growth rising for the first time in seven years amid a dramatic decline in both imports – a weak British pound reduced purchasing power for British consumers – and exports – uncertainty Over the a short-term business environment for businesses of all sizes is incredibly difficult in operational and product planning.
What’s next for the British Pound and Brexit?
The very possibility of the UK leaving the EU was extremely damaging to the British pound. Losing more than 20% over most of its major counterparts following the June 2016 Brexit vote, the British pound is unlikely to recover significant values until the UK is ready to leave the EU.
There is little reason to think that unless an early general election is announced sometime in the next few weeks, there is significant room for recovery for the British pound. The technical studies of both GBPUSD and GBPJPY suggest that all short-term gains are simply counter trends in the context of a broader, perennial decline.
GBPUSD TECHNICAL ANALYSIS: WEEKLY SCHEDULE (JUNE 2016 TO AUGUST 2019) (Chart 1)
A glance at the weekly timeline highlights the devastation Brexit inflicted on the British pound. Ever since Boris Johnson became Prime Minister of the United Kingdom, GBPUSD has accumulated losses every week and the last round of lower notes has resulted in GBPUSD falling during March 2017 to its lowest levels of 1.2109. Now the lowest value from January 2017 is in focus at 1.1986, with the post-Brexit vote in October 2016 putting it in focus shortly thereafter, at 1.1905.
GBP / USD Technical Analysis: Daily Price Chart (August 2018 to August 2019) (Chart 2)
In our GBPUSD technical forecast last week. it is noted that "as is often the case with symmetric triangle splitting, there is a likelihood of returning to the base of the triangle; in this case, with a bearish interruption, we will ask GBPUSD to return to the lower base of the symmetric triangle, set in October 2016, at 1.1905 over the coming weeks . "
Progress is still being made considering the symmetric failure voltage of the triangle, with that effort, with GBPUSD falling to its lowest annual level on Monday, August 12 at 1.2014.
With bearish momentum not only on the weekly time frame but also on the daily one – the price remains below the daily 8-, 13- and 21-EMA envelope, while both the MACD and Slow Stohastics trend are lower in the bearish area – GBPUSD remains on the way to return to the October low of 1.1905. Just slightly above the daily 8-EMA would question the idea that the path of least resistance remains to the forces for GBPUSD.
IG Customer Feel Index: GBP / USD Price Forecast (August 13, 2019) (Graph 3)
GBPUSD: Retailers data shows that 76.0% of traders are net, with the traders' ratio being long and short from 3.16 to 1. In fact, traders have remained net-long since May 6 when GBPUSD traded close 12993; the price has since moved 7.2%. The number of net traders is 0.7% lower than yesterday and 5.7% lower than last week, while the number of net traders is 1.2% higher than yesterday and 8.1% higher than last week.
We usually take the opposite view on the mood of a bunch of people, and the fact that traders are inexorably showing how GBPUSD prices can continue to fall. However, traders are less untouched than yesterday and compared to last week. Recent mood swings warn that the current GBPUSD price trend could soon be reversed despite the fact that traders remain long-standing.
GBP / JPY Technical Analysis: Daily Price Chart (October 2016 to August 2019) (Chart 4)
After spending most of the last 18 months trading down tilting channels, GBPJPY prices have recently reached terminal speeds, falling through channel support on the way to fresh annual lows. In the context of price action since the post-Brexit election in October 2016, there is little meaningful support between the current price (128.43) and the low post-Brexit voting price at 124.79.
GBP / JPY Technical Analysis: Daily Price Chart (August 2018 to August 2019) (Chart 5)
With the return of the US-China trade war, global stock markets collapsed, and in turn safe havens such as precious metals, the US Treasury and the Japanese yen were sold. As such, it is possible to form a cluster of morning stars, which is evidence of long-term effort at the bottom.
A key aspect of the recent downturn is that the price has been kept below daily 8-EMA on a closing basis since July 23. As long as GBP / JPY prices keep moving below the daily 8-EMA, and beyond, daily 8-, 13- and 21-EMA envelopes, there is no good reason to think that the rally is anything other than a counter-move. Traders may want to look at selling opportunities together as a result, rather than buying stock; the potential upside comes above the daily 21-EMA, whose price has not closed above May 6.
IG Customer Feel Index: GBP / JPY Price Forecast (August 13, 2019) (Chart 6)
GBPJPY: Retailer data shows that 74.1% of traders are net, with traders long and short of 2.86 to 1. In fact, traders have remained net-long since May 6, when GBPJPY traded close 145.41; the price has since moved up 11.6%. The number of net traders is 7.2% lower than yesterday and 7.5% lower than last week, while the number of net traders is 29.8% lower than yesterday and 7.0% lower than last week.
We usually take the opposite view on the mood of a bunch of people, and the fact that traders reluctantly suggest that GBPJPY prices may continue to fall. Traders are further unaffected than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger trading bias than GBPJPY.
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— Written by Christopher Vecchio, CFA, Senior Currency Strategist
Until the sequelstarring Christopher Vecchio, email at firstname.lastname@example.org
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