GBPUSD to fall with a fizzle, not a bang
Yesterday I was reflecting on May's negotiating approach which I called, it could always be worse. The conclusion that I reached was that there is only one likely 'sell' outcome for the GBP at the moment and that is a 'no-deal' scenario:
- No deal - unlikely at this stage GBP sell
- Cross party deal (Soft Brexit)- GBP buy
- EU budges on backstop - GBP buy
- EU finds a way to fudge the back stop - GBP buy
- Article 50 extension - GBP buy
This was my breakdown above and thanks, as always, for the thoughtful comments from our usual suspects at this time of the European session. My only annoyance is that I can't sit down and gave a cup of tea with you all (it is too early for a healthy beer at 0700GMT after all). Perhaps I should ask Adam if we could have a ForexLive 'pop-up' appearance. Maybe we could all turn up at one of Draghi's news conference and thank him for all the good times ;-).
Now, to return to the main point, as I was reflecting on this further today I realised that the no-deal Brexit scenario would only become a 'reality' at the end of March. The official deadline is 29 March. The first port of call in a no-deal scenario would be an extension. So, this means there is not going to be a 'shock' no deal announcement until then. It is not going to be a SNB 1.2000 EUR/CHF peg removal scenario in the way a no -deal Brexit is announced in the sense that we have a deadline. For now, Britain has time. The only negative news will be the increasing likelihood of a no-deal outcome. That's a slow grind down, not a massive drop and that is what we have seen in the last few days. A slow grind. So, this puts a sell and a buy into view for me.
I like the weekly S1 pivot point at 1.2600 for a buy on the daily chart. A stop can be placed at either 1.2500 (nice and tight up to the level) or at 1.2300 (out of the way and underneath 03 January swing low).
Also, as I write, I quite like a sell from the present pivot point level and 100EMA on the daily chart with a stop at 1.3000 and a target down towards 1.2700
Options outlined below
