GBP/USD Price Forecast: Brexit Has a “50-50” chance – Top UK Cabinet Minister

  • UK International Trade Secretary, Liam Fox, says that Brexit has a “50-50” chance.
  • GBP/USD remains vulnerable to downside risks, given the lack of political progress.

UK Brexit worries remain at elevated levels, while the British ministers continue to enjoy their ‘Christmas recess’. Unfortunately, the talk of the UK EU Membership referendum, is very much going to be carried well into a third year.

Brexit Has a “50-50” Chance

In terms of the latest commentary, the international trade secretary, Liam Fox, suggested that Brexit now has a “50-50” chance. The possibility that the UK will not be leaving the EU on 29 March, should the MPs reject Theresa May’s Brexit deal.

UK members of parliament will be due to vote on the Prime Minister’s withdrawal agreement in January. The deadline of UK scheduled to leave the EU on 29 March is drawing ever closer, while being very much up in the air.

This vote was initially scheduled for 11th December, however a big loss of confidence for Theresa May as she was forced to make a decision and postpone it. She did this as it became clear there was going to be defeat at quite a large margin.

The Labour Party leader, Jeremy Corbyn, continues to pile on the pressure, urging Mrs May to cut short MPs’ Christmas break. He is calling for this to allow for an earlier vote, as they are not due back in the Commons until 7th January.

Technical Review GBP/USD

GBP/USD daily chart. Price action has been stuck within a 1 cent range, 1.26-1.27. It remains vulnerable to downside risks.

Over the last two weeks, there has been little in terms of major price movement for GBP/USD. This not being surprising of course, given the festive period and market closures. Volumes are expected to gradually pick up this week, from 2nd January, as market participants return from their holidays. In terms of real full swing, this may not be anticipated until the second week of January.

GBP/USD has been moving within a tight range of 1.26-1.27 price range. Given there will be much uncertainty heading into the UK ministers return and the vote, it wouldn’t be surprising to see GBP on the back foot. As seen in the back end of this year, GBP is extremely sensitive to any Brexit updates.

Breakout and Retest of Rising Wedge

GBP/USD 4-hour chart. Price action has broken out and retested a rising wedge pattern.

Aside from the bearish fundamentals, via the 4-hour chart view, GBP/USD had been moving within a rising wedge pattern. The formation of this began on 11th December, to then be breached by the bears on 26th December. A retest of that pattern was seen on 28th December, with the lower trend line rejecting a break back through.

Should the bears capitalize on the above-detailed, then a retest of the December low area may be seen. This can be observed sub-1.25, the low printed on 11th December, down at 1.2480. A breach of this could be very punishing, potentially inviting a free-fall. The direction however will be helped on from the latest developments on Brexit, for now they remain bearish.

Featured image courtesy of Shutterstock.

 

Author:
Ken 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.