3 Pound-Based Pairs, 2 Should Be Traded Now
The Brexit Has The Pound On The Move
If there has been one thing moving the markets over the past two years that has grabbed my attention it is the Brexit. The Brexit is a monumental event for world politics, it is the succession of a major member-nation from the EU. Without doubt, the Brexit is going to have far-reaching implications for the English and that has been fueling a monster debate in Parliament. The debate centers on how the Brexit will occur and has boiled down to what people call The Irish Backstop. The Backstop, effectively, would tie the UK to the EU indefinitely despite a Brexit should there be no clear ending point for other key issues of the exit. The point is to keep Ireland’s border with the UK clear and open, something that might not be possible due to politics beyond my understanding.
The most recent events in the whole Brexit drama are the removal of Theresa May from her post as PM, the election of pro-Hard-Brexit Boris Johnson to PM, and the ensuing inability (and ongoing, lingering, never-ending) of Parliament to make a decision. Needless to say there is no end in sight. When it comes to the pound the dominate factor is that the PMs do not want a hard-Brexit and that is stiffening the Pound. The GBP/USD is one of the more bullish charts I’ve seen in forex for a while and shows an asset on the brink of full reversal. Now that one-month highs have been set above the baseline at 1.2900 it looks like a nice double-bottom formation is in process. This reversal is supported by both indicators so I see at least a near-term type rally unfolding over the next week or so, maybe more. It is possible next week’s FOMC meeting will send this pair shooting higher (maybe lower if the FOMC is less dovish than expected).
The GBP/JPY is in just about the same position, set up for a nice double-bottom reversal. The indicators here are even stronger so I see a decent rally/reversal brewing on this chart. A move higher may hit resistance at 134.00 and 136.00, a move above 136.00 would be very bullish.
The EUR/GBP is also set up for big move but it’s harder to see which direction this one will be. The chart is showing good support at the 0.8925 level but that may become a pivot point. The ECB is meeting this week and largely expected to ease policy and stimulate the economy. this move could weaken the euro and send the pair moving lower, if they don’t do as much as expected or if the moved is baked into prices the pair could move higher.
