GBP/USD & GBP/JPY Stem a Bleeding on Latest Brexit News

Brexit Latest Talking Points:

  • UK Prime Minister Boris Johnson suffered a better currently in UK courts when a decider ruled that he could not prorogue council – in other words, he could not postpone UK council in sequence to force by a no deal, “hard Brexit.”
  • Subsiding fears of a no deal, “hard Brexit” – if usually temporarily – dovetail with certain developments on a US-China trade fight front. Riskier resources have been bid aloft while a low agreeable protected havens have mislaid ground.
  • Retail trader positioning suggests that a British Pound might be underneath some-more vigour streamer into a final days of July.

Looking for longer-term forecasts on a British Pound? Check out a DailyFX Trading Guides.

UK Prime Minister Boris Johnson’s ambitions for a swift exit from a European Union took a strike currently when a British judge ruled that he could not prorogue council – in other words, he could not postpone UK council in sequence to force by a no deal, “hard Brexit.”

UK Economic Data Softens as Brexit Uncertainty Looms Large

If usually temporarily, fears of a no deal, “hard Brexit” have subsided as impetus down a trail towards mercantile hurt for a UK has been slowed. Last week’s Q2’19 UK GDP news was surprisingly weak, with a quarterly expansion rate constrictive for a initial time in 7 years amid a thespian tumble in both imports – a diseased British Pound has sapped UK consumers’ purchasing energy – and exports – a doubt over a near-term business sourroundings is creation operational and prolongation formulation impossibly formidable for firms of all sizes.

What’s Next for a British Pound and Brexit?

The small awaiting of a UK withdrawal a EU has been intensely damaging to a British Pound. Losing some-more than 20% opposite many of a vital counterparts given a Jun 2016 Brexit vote, a British Pound is doubtful to redeem any poignant value so prolonged as a UK is staid to leave a EU.

There is small reason to consider that, unless a snap ubiquitous choosing is called someday over a subsequent few weeks, that there is poignant range for liberation for a British Pound. Technical studies of both GBPUSD and GBPJPY advise that any near-term gains are simply countertrend moves in a context of a broader, multi-year declines.

GBPUSD TECHNICAL ANALYSIS: WEEKLY TIMEFRAME (JUNE 2016 TO AUGUST 2019) (CHART 1)

GBP/USD amp; GBP/JPY Stem a Bleeding on Latest Brexit News

A demeanour during a weekly timeframe highlights a drop that Brexit has wrought on a British Pound. Since Boris Johnson became UK primary minister, a GBPUSD has amassed waste any week, and a latest spin reduce saw GBPUSD relapse by a Mar 2017 low during 1.2109. Now, a Jan 2017 low is in concentration during 1.1986, with a post-Brexit opinion in Oct 2016 entrance into concentration shortly afterward during 1.1905.

GBP/USD Technical Analysis: Daily Price Chart (August 2018 to Aug 2019) (Chart 2)

GBP/USD amp; GBP/JPY Stem a Bleeding on Latest Brexit News

In a GBPUSD technical forecast final week, it was noted that “as is mostly a box with exquisite triangle breakdowns, there is a odds of a lapse to a bottom of a triangle; in this instance, with a bearish mangle occurring, we’ll be looking for GBPUSD to lapse to a downside bottom of a exquisite triangle, set in Oct 2016, during 1.1905 over a entrance weeks.”

Progress continues to be done with honour to a exquisite triangle relapse effort, been with honour to this effort, with GBPUSD descending to a uninformed yearly low on Monday, Aug 12 during 1.2014.

With bearish movement organisation on not usually a weekly timeframe though a daily as good – cost stays next a daily 8-, 13-, and 21-EMA pouch while both daily MACD and Slow Stochastics trend reduce in bearish domain – GBPUSD stays on march for a lapse to a Oct 2016 low during 1.1905. Only a tighten above a daily 8-EMA would chuck into doubt a idea that a trail of slightest insurgency stays to a downside for GBPUSD.

IG Client Sentiment Index: GBP/USD Price Forecast (August 13, 2019) (Chart 3)

GBP/USD amp; GBP/JPY Stem a Bleeding on Latest Brexit News

GBPUSD: Retail merchant information shows 76.0% of traders are net-long with a ratio of traders prolonged to brief during 3.16 to 1. In fact, traders have remained net-long given May 6 when GBPUSD traded nearby 1.2993; cost has changed 7.2% reduce given then. The series of traders net-long is 0.7% reduce than yesterday and 5.7% reduce from final week, while a series of traders net-short is 1.2% aloft than yesterday and 8.1% aloft from final week.

We typically take a contrarian perspective to throng sentiment, and a fact traders are net-long suggests GBPUSD prices might continue to fall. Yet traders are reduction net-long than yesterday and compared with final week. Recent changes in perspective advise that a stream GBPUSD cost trend might shortly retreat aloft notwithstanding a fact traders sojourn net-long.

GBP/JPY Technical Analysis: Daily Price Chart (October 2016 to Aug 2019) (Chart 4)

GBP/USD amp; GBP/JPY Stem a Bleeding on Latest Brexit News

After spending many of a past 18-months trade in a downward tilted channel, GBPJPY prices have recently strike depot velocity, descending by channel support on their approach to uninformed yearly lows. In context of cost movement given a Oct 2016 post-Brexit opinion low, there is small suggestive support between stream cost (128.43) and a post-Brexit opinion low during 124.79.

GBP/JPY Technical Analysis: Daily Price Chart (August 2018 to Aug 2019) (Chart 5)

GBP/USD amp; GBP/JPY Stem a Bleeding on Latest Brexit News

With a US-China trade fight relocating behind to a state of détente, tellurian equity markets have been buoyed, and in turn, protected breakwater resources like changed metals, US Treasuries, and a Japanese Yen have all been sole off. As such, it is probable that a morning star candle cluster is forming, justification of a near-term bottoming effort.

The pivotal aspect of a new downtrend is that cost has been holding next a daily 8-EMA on a shutting basement given Jul 23. As prolonged as GBP/JPY prices are nutritious a pierce next a daily 8-EMA, and some-more broadly, a daily 8-, 13-, and 21-EMA envelope, there is no good reason to consider that a convene is anything other than a countertrend move. Traders might wish to demeanour during opportunities to sell rallies as a outcome rather than shopping a low; a intensity spin comes above a daily 21-EMA, that cost has not sealed above given May 6.

IG Client Sentiment Index: GBP/JPY Price Forecast (August 13, 2019) (Chart 6)

GBP/USD amp; GBP/JPY Stem a Bleeding on Latest Brexit News

GBPJPY: Retail merchant information shows 74.1% of traders are net-long with a ratio of traders prolonged to brief during 2.86 to 1. In fact, traders have remained net-long given May 6 when GBPJPY traded nearby 145.41; cost has changed 11.6% reduce given then. The series of traders net-long is 7.2% reduce than yesterday and 7.5% reduce from final week, while a series of traders net-short is 29.8% reduce than yesterday and 7.0% reduce from final week.

We typically take a contrarian perspective to throng sentiment, and a fact traders are net-long suggests GBPJPY prices might continue to fall. Traders are serve net-long than yesterday and final week, and a mixed of stream perspective and new changes gives us a stronger GBPJPY-bearish contrarian trade bias.

FX TRADING RESOURCES

Whether we are a new or gifted trader, DailyFX has mixed resources accessible to assistance you: an indicator for monitoring trader sentiment; quarterly trading forecasts; methodical and educational webinars hold daily; trade guides to assistance we improve trade performance, and even one for those who are new to FX trading.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail during cvecchio@dailyfx.com

Follow him on Twitter during @CVecchioFX

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