As we said earlier, midnight Friday. Britain has officially become outside the European Union. Monday is the first trading day for sterling outside the European Union. The cable fell almost 200 pips in one day. What happened and what will happen next?!
Simply the picture is still not clear. Will the Brexit be positive or negative for Britain? I think there are two answers to this question. There are implications for Britain’s exit from the European Union in the short and long term.
In the short-term: I think the effect of the Brexit started two months before it was implemented. The pound is moving sideways with an upside bias on the weekly chart.
GBPUSD Faces Corrective Pullback Threats
As shown in the chart below. The pair consolidates above 1.2995 levels. But any attempts to push the pair higher will be limited by 1.3333 levels. Sustained trading – weekly closing – above 1.3333 is needed to prevent the pair from returning to the downside. If seen the focus will turn to 1.3500/1.3750 levels.
On the downside, immediate support comes around 1.2995 levels. Below that level – weekly closing basis- will extend the corrective pullback to 1.2700 levels, further weakness aims the 1.2500 levels (broken resistance turned support).
So for day traders…you need to keep an eye on 1.2995/1.3333 levels. The pair is moving sideways within the suggested range. Anyway; how to trade GBPUSD?
Wait for a clear break below 1.2995 or above 1.3333 levels ( 2or 3 weekly closes) for confirmation…
How will Brexit affect GBPUSD in the long run?!!
In the long-term: There’s a potential for upside move as long as the pair trades above 1.2895 levels on a monthly closing basis. Immediate resistance comes at 1.3272 level ahead of 1.3513 levels. A monthly closing above 1.3272 followed by a weekly closing above 1.3333 will pave the way to 1.3500/1.3750 levels. Stability above 1.3500 ( monthly closing basis) will increase the risk for the 1.4000 levels…
On the downside, support comes in the 1.2895 levels. A monthly closing ( 2 or 3 closes is better) below 1.2895 will pave the way to 1.2157 levels…
Fundamentally, I think there are two directions in the long run:
- GBPUSD will be bullish but it may take some time, months, a year and possibly years.
- GBPUSD will move against the EURO. In another word; To achieve the first point or Britain becomes a major economic power in the world. U.K must work against the EURO…