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British Pound and Brexit Chaos: May’s Leadership Challenged

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The British pound rebounded sharply on Wednesday, as conservative lawmakers prepared to hand Prime Minister Theresa May a vote of no confidence for her handling of Brexit. The embattled leader could be ousted from her position in a matter of weeks should the vote go as planned, complicating an already messy Brexit proceeding.

Pound Plays the Rebound

Pound sterling rose 1.2% against the dollar on Wednesday to reach $1.2637. GBP/USD is rebounding from a sharp selloff last week that was stoked by uncertainty over the United Kingdom’s exit from the European Union.

The sharp rally overcame several technical obstacles between 1.2550-1.2600. The path of least resistance is higher, putting cable on a path to re-test the upper end of the 1.2600 region.

The U.S. dollar exhibited weakness across the board midweek, registering losses against the euro and Canadian dollar. This comes despite the release of November inflation data showing a steady rise in consumer prices. The U.S. core consumer price index (CPI) rose 0.2% on month and 2.2% annually, the Department of Labor said. Both readings were in line with forecasts.

May’s Leadership Challenged

Theresa May’s tumultuous term as prime minister may be coming to an end as her party prepares a ballot on whether to oust her from the leadership role. As The Wall Street Journal reports, Tory lawmakers will vote on May’s future this evening. A vote of no confidence would require the ruling party to find a new leader, a process that could take several weeks to begin. May could retain her post in the interim and resign once her successor is chosen.

The vote was instigated after 48 Conservative lawmakers sent letters of no confidence in the prime minister to a special party committee, exceeding the minimum threshold of 15% of existing Tory representation in Parliament.

“A change of leadership in the Conservative party now will put our country’s future at risk and create uncertainty when we can least afford it,” May said Wednesday, according to WSJ. “Weeks spent tearing ourselves apart would only create more division just as we should be standing together serving our country.”

May replaced David Cameron shortly after the Brexit vote in 2016. Her term in office has been wrought with failures and uncertainty, beginning with a botched early-election call that weakened her party’s standing in the House of Commons.

While the U.K. has secured a draft Brexit deal with the European Union, it satisfies neither the Europhiles nor the Brexiteers, putting May in a contentious position in the House and within her own cabinet. The existing text would put the U.K. on the exit path by March 2019.

Featured image courtesy of Shutterstock.

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4.7 stars on average, based on 739 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Price Prediction: Bull Trap Pattern Complete in EUR/USD, New Lows Likely Ahead

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Still Diverging Economies, Converging Monetary Policies

While the long-term trend is still negative in the EUR/USD, the most traded forex pair had a very active start to the year, and it seemed that after a long period of weakness, will finally experience a meaningful counter-trend rally against the Greenback. The European common currency moved above key resistance in the wake of the dovish shift by the Federal Reserve, despite the disastrous industrial production reports and the dismal PMIs from the Eurozone.

The weakening US economic numbers also helped the rally attempt, but despite the move above 1.15, the currency failed to extend the move and it plunged back below resistance, to the previously dominant trading range, completing a bull-trap pattern which will likely lead to the continuation of the long-term trend, with all eyes on the previous low near 1.1215.

Long-Term Chart Analysis

EUR/USD, Daily Chart Analysis

Looking at the daily chart, the trend is clearly bearish in the pair, and even though the steeper of the two main declining trendlines have been briefly violated during the recent rally, which made a stronger counter-trend rally a possibility, the broader trendline is in no danger. The oversold MACD readings that developed in the pair have been cleared back in December, and now the indicator is bearish for the first time since early November.

There is considerable support in the 1.1275-1.13 zone, but given the lack of follow-through after the break-out attempt, and the competed bull trap pattern, odds clearly favor a new swing lower in the ongoing long-term downtrend. Targets for the move are found near 1.1135 and in the 1.0850-1.0950 zone.

Short-Term Chart Analysis

EUR/USD, 4-Hour Chart Analysis

The pair is slightly oversold from a short-term perspective, and a move back to 1.1440 is in the cards here. That said, given the proximity of the 1.15 level and the risk/reward ratio of a long-term trade, traders could enter right away, ignoring the short-term setup. A dip below the lower boundary of the broader consolidation pattern would further confirm the continuation of the long-term trend, but should the global risk rally continue, a period of range trading could still be ahead before a test of the lows near 1.1215.

Key Events Ahead for the Pair

Tomorrow we will have the US Industrial Production and Prelim Michigan Consumer Sentiment coming out. Next week, Tuesday will likely see all the US indicators which have been delayed because of the government shutdown, such as Retail Sales, Housing Starts, Existing and New Home Sales, and the Trade Balance. The Eurozone Manufacturing and Services PMIs will be out on Thursday, while all eyes will be on the ECB’s rate decision and the following press conference, and on Friday the Durable Goods report could cause a sizable move in the pair.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 443 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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GBP Price Prediction: British Pound Jumps on Growing Backing for PM May’s Brexit Deal Ahead of Vote

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  • GBP catches a bid across the board as Prime Minister Theresa May gains ERG support.
  • Despite session gains, GBP/USD technically has vulnerabilities to downside risks, given rising channel formation.

GBP Bulls Awaken

The British pound (GBP) saw a decent jump to the upside on Monday, after an initially very choppy directionless start to the session. The buying swooping into GBP/USD came on the back of a growing number of ministers set to back Prime Minister Theresa May. Specifically, attention was grabbed after closely followed political watcher Robert Peston tweeted that “influential Tory Brexiter MP tells me he and his ERG Brexiter colleagues will be voting with Theresa May and the government all day tomorrow”. This is significant as the ERG is a very influential Brexit research group, which was previously plotting ways to oust PM May.

GBP/USD jumped to its highest level seen since 22nd November. The pair had seen an initial spike of 85 pips to the upside. Gains were capped however by a known strong area of supply; this can be seen tracking from 1.2870 up to 1.2930. The price has not been above here since 15th November 2018, and the bulls having faltered here on several occasions attempting to move above. Should GBP/USD manage to move above this zone, it would be a very strong signal that it is out of the bear market. Technically, this would be largely attractive for inviting further buyers to come in.

A detailed analysis of the upcoming Brexit vote can be viewed here: This Tuesday Will Be Zero Hour For the British Pound

Price Remains Confined Within Channel

GBP/USD daily chart. Price action remains within the confinements of a rising channel.

Another key technical observation is an ascending channel formation, which can be viewed via the daily chart. The GBP/USD pair has been moving within this since 12th December 2018, having gained over 400 pips since it took shape. The daily candle today briefly spiked above the upper tracking trend line of the pattern. However, the price was squeezed back within the confinements of this. Touted profit-taking kicked in towards the close of the European markets. This is not too surprising, as participants maintain an element of caution heading into the high-profile vote.

Given the nature of the above-described formation, should it play out to the textbook, vulnerabilities still point to a breakout south. This move would be heavily assisted should the British Prime Minister lose the meaningful vote on Tuesday. In terms of key levels to note, to the upside, a break above the 1.2930 supply zone will invite large buying pressure. To the downside, a breach of 1.2650, the lower support of the channel, will open flood gates to selling.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 110 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Analysis

GBP/USD Price Prediction: GBP/USD Pump and Dump Eyed

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  • GBP/USD has been rallying heading into the crucial vote on Theresa May’s Brexit deal with the EU.
  • Markets could very well be making room for a big sell-off, depending on the outcome.

Markets Expect PM May to Fail

GBP/USD surprisingly has been making its way north, as the price on Friday made one final big push for the week. This comes despite the crucial vote on Tuesday 15th January, where UK parliament will vote on PM May’s EU deal. It appears the market is strongly anticipating the Prime Minister will lose this. As a result, the case for this is already being priced in.

Despite the fact the markets are expecting this sort of outcome, there could still very well be room for a large fall for GBP. This rally being observed may be the pump, making room ahead of it encountering a large dump. In terms of this type of behavior it has been seen time and time again ahead of big market moving events.

In these heightened times of uncertainty, both economically and politically, GBP/USD has still managed to close in the green for four weeks running. It has moved to its highest levels seen since week of 26th November. This has been the longest weekly run observed for the pair, going back as far as August 2018.

Key Technical Levels

GBP/USD 4-hour chart.

Looking via the 4-hour chart view, an ascending channel formation can be eyed, which has been in play since 11th December. Despite the freak mini touted flash crash on 2nd January that rippled the markets, GBP/USD has respected this pattern. The price has been grinding higher within this, having gained almost 400 pips.

The bull run on Friday was capped by the upper acting trend line, which is tracking at 1.2860-70. It did print its highest level since 22nd November in that latest squeeze higher. Given the further wave of uncertainty that will hit the market next week, the price will likely continue to respect this channel. Keeping in mind the recent rejection on Friday, price pressures to the downside could be eyed at the open. Support levels to note via the 4-hour; 1.2770, 1.2716 and then 1.2660.

GBP/USD weekly chart.

In terms of the weekly chart, should the bulls intend to resume the upside pressure, they will need to break down 1.2870. This is a resistance area and a break and close above can open the door for a return to the psychological 1.3000 mark. To the downside, big weekly levels to note are 1.2770 and 1.2660. Any failure of those mentioned holding, then a fast move back south to a demand zone tracking from 1.25-1.2400 is to be expected.

Featured image courtesy of Shutterstock.

 

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 110 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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