The pound trades lower on the day as a big two weeks for Brexit looms
It most certainly looks like holding a break above the 100-day MA (red line) is one step too far for buyers at this point. Not least we’re heading into a pivotal two weeks for Brexit negotiations. Expect the pound to trade in a volatile manner as such. Headline risks are going to be at the very paramount of what will be moving the quid in this time period, so strap yourselves in. It’s going to be ‘squeaky bum time’.
Cable now looks like it is set for a move to test the 200-hour MA @ 1.3051:
As long as price stays above that, the near-term bias remains more bullish. But the overall momentum still resides with sellers as long as price stays below the 100-day MA pointed out above.
There are cases to be built on both sides of the equation so now the only thing is to wait on the headlines to drive direction. Here’s what is taking place this week in terms of Brexit:
- UK Brexit secretary Dominic Raab is set to head to Brussels to present new proposals
- UK Cabinet/parliament to meet on Tuesday — but likely to only discuss the budget
- EU 27 members to meet on Wednesday ahead of the summit next week
Raab will likely have to present any new proposals to resolve the Irish border/backstop issue by Wednesday otherwise next week’s EU Summit will pretty much be a non-event for Brexit negotiations. And even if there is good progress to be had, November now appears to be the realistic deadline for any deal.
Even so, the obstacles don’t end there. Theresa May will still need to bring back those proposals to a vote in parliament — where she still faces difficulty in gathering support. Tuesday’s parliament meeting may not be one where Brexit is at the forefront but expect some voices to call for a vote to come regardless.
It’s a really messy time for the UK as they need to try and get some form of discussion going in the EU Summit on 17-18 October. For now, trading the pound will involve what or how soon can Raab and May present credible proposals to European leaders for discussion. That will drive sentiment for this week. And thereafter, the EU’s response will then drive sentiment ahead of next week’s summit with focus then being turned towards May’s battle with parliament members.