Sterling (GBP): PM May Has 12 Days or Parliament May Take Over Brexit
Brexit Latest: News, Updates and Sterling Technical Analysis
- Amendments defeated in Parliament as expected.
- Sterling slips but rolls with the punches.
Sterling (GBP): Support Being Eroded
Thursday’s votes in the House of Commons were defeated as had been fully expected, adding to the pressure on PM May to get a workable deal with the EU in the next two weeks. If, as seems likely, she is unable to get the guarantee from the EU on the Irish backstop that she has been demanding, it is likely that Parliament will take control of the process. While this uncertainty may weigh on Sterling in the near-term, if Parliament takes over, it is very likely that Brexit negotiations will be extended for a few months and, more importantly for the Pound, the No Deal option will be taken off the table.
The worry for Sterling is that the main bill – approving the PM’s Brexit strategy - was defeated again last night after Conservative Eurosceptics abstained from voting with the PM as they feared that this would lead to the No Deal option being taken off the negotiating table.
Against this increasingly time sensitive backdrop, Sterling remains relatively stable, edging slightly lower before slowly pulling back some of its losses. This slow drip lower over the last week has pushed GBPUSD under all three moving averages, a bearish set-up, and through 23.6% Fibonacci retracement at 1.2894. The old October 30 swing-low at just under 1.2700 is the next downside target, followed by the January 15 spike low at 1.2672. The RSI indicator has fallen to levels last seen in mid-December and is nearing oversold territory after being in overbought territory less than three weeks ago.
GBPUSD Daily Price Chart (June 2018– February 15, 2019)
IG Retail Sentimentdata shows clients are 70.2% net-long GBPUSD, a bearish contrarian indicator. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBPUSD bearish contrarian trading bias.
--- Written by Nick Cawley, Analyst
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