Brexit: Can the GBP Recover Against US Dollar?

Brexit: Can the GBP Recover Against US Dollar? The Brexit has been a contentious political issue which has shifted paradigm and status quo amongst the political elites in …

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Brexit: Can the GBP Recover Against US Dollar?

The Brexit has been a contentious political issue which has shifted paradigm and status quo amongst the political elites in Britain. Immediately after the referendum, the Pound plummeted and shed 11% of its value as the outcome of mass sell-off after they decided to leave the Euro.

At this point most economists expect the MPC to slash its interest rate by 25 basis points to 0.25% with MPC members expected to join this shifting from 0-9-0 from last month’s 0-0-9. If we see any major divergences from these expectations, we will likely see an increase in forex trading activity over a broad number of markets.

This is a major economic activity for today and volatility is expected irrespective of whether they slash their interest rates or not. Theresa May is known for her stance and being a conservative, she will fast track and perhaps trigger Article 50 which will then set ground for Britain to exit the euro zone with some concessions made of course especially now that London is a key financial hub in the world.

Forex Weekly Chart Analysis: GBP/USD

To the charts, and the weekly chart shows that the price action is overstretched with two whole candlesticks formed outside the lower Bollinger Bands since Brexit. I shall be looking forward for an even weaker Pound especially when the monthly chart is brought into focus. The buying pressure and the lower wick were definitely from the BoE intervention as they tried to hold the Pound from further devaluation.

Forex Trading: GBP/USD

Today traders will likely look forward to add to our shorts just before the BoE and ride with the current weekly trend which indicates short. This is so because the stochastics in the weekly charts has yet to form the buy signal and also because of political and reform uncertainty in the UK.

These wide currency swings only makes it prudent to trade this pair from the weekly chart which can soak in temporary swings in the lower timeframes and give you an independent long term view. A potential profit target should be the 261.8% Fibonacci extension, which represents the 1.27 price level.

 


 

 

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