CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Pound Pops on Brexit Headline

November 15, 2019 11:44 AM

Pound Pops on Brexit Headline

After weeks of headlines regarding the status of Brexit heading into the October 31st “hard deadline”, things have been pretty quiet the last two weeks, as the decision was made to extend the deadline to January 2020 and hold elections on December 12th.  This is essentially another vote for Brexit.  If Boris Johnson ends up with a majority, Brexit will happen sooner than later.  However, if the Labour Party and Jeremy Corbyn are able to claim a majority, there will most likely be a second vote on the Brexit referendum.  December 12th is just under a month away, and volatility has slowed.  However, as we get closer to the elections, watch for comments from all parties as they try to persuade voters.  According to the Telegraph earlier today, the Brexit Party said they have stepped down from 43 non-Tory Party seats.  As a result, Sterling went bid as this is considered Brexit friendly.

On the headline, GBP/USD spiked 40 pips.  This may not seem like a big move, but with the low volatility we’ve had lately, this was a welcome move (for those long GBP).  However, is GBP/USD just biding time until the elections?  On a weekly chart. The 1.2800/1.3000 level seems to be a perfectly normal place to pause if price were to advance further.  In early October, there was a good deal of speculation that Brexit may indeed happen (after a few years of negotiating).  GBP/USD moved from near 1.2200 to near 1.3000 in two weeks.  We have been in consolidation mode since then, forming a flag formation.  The target for a flag is the length of the flag pole, added to the breakout point of the flag.  If price we to break above 1.3000 soon, the target is near 1.3600, over 600 pips higher! 

Source: Tradingview, City Index

Why was this a normal place for price to stall? 

1)      Horizontal resistance and prior lows from March 2019 (which now act as resistance)

2)      Near the psychological resistance level of 1.3000

3)      38.2% Fibonacci retracement level from the highs of April 2018 to the lows in September 2019

4)      61.8% Fibonacci retracement level from the highs of March 2019 to the lows in September 2019

As we get closer and closer to the December 12th elections,  if the markets feel there will be a clear winner, it will begin to price the potential outcome into the market.  If it appears Boris Johnson and the Conservatives will have a majority, GBP/USD could be near 1.3600 in a hurry.  If it appears Jeremy Corbyn and the Labor Party will win, GBP/USD could be down near 1.2200 just as fast.  Watch the headlines as we get closer to December 12th!


StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024