ZuluTrade Blog

Weekly Digest - Can GBP repeat the huge gains recorded last week?

Market View | Monday, September 9, 2019 2:28 PM GMT

GBP/USD offered up excellent day and swing trading opportunities during the past week, especially for the Traders and Investors in our community who remained long. You can check out who was on the right side of momentum by perusing the ZuluTrade Traders ranking.

 The major pair oscillated in a wide, bullish trading range of circa 300 pips during the trading week ending Friday September 6th, as the subject of Brexit hit the financial news radar. The political developments in the U.K. also perfectly illustrated the symbiosis between fundamental and technical analysis, as text-book T.A. occurred encouraging many swing and day-traders on our leader board to either go long, or remain in their long GBP positions.

 The U.K. prime minister Boris Johnson endured a breathtaking week of incompetence in government. He attempted to take on presidential powers by proroguing (shutting down) Parliament for five weeks, asked for Parliament to vote his government out of power in order to trigger an election to sneak through a no-deal Brexit crash-out. He lost various votes as Parliament passed a law sending him back to Brussels to renegotiate rather than the U.K. crash out with no deal. He sacked 21 of his M.P.s and suffered the ignominy of a loyal M.P. “crossing the floor” of the House of Commons as he spoke to join the Liberal Democrats.

 His ego was further injured as he went walkabouts in Yorkshire towns in England where he was berated for not being in Brussels negotiating and approached by a polite, middle-aged man who shook his hand vigorously whilst politely asking him to “please, leave my town”, a phrase that quickly became an internet meme. Political comedy writers were finally overloaded with material after he botched a Trump, presidential style appearance in front of new police recruits, when one female recruit fainted towards the end of his speech.

 Over the weekend the political chaos continued, more resignations were recorded most notably from his cabinet. He also refused to say he’d resign if he’s compelled (by the newly passed law) to seek out a fresh arrangement with the E.U. Instead he intimated he’d be prepared to become a martyr for the leave campaign by breaking the law.


Brexit News at Zulutrade


Technical analysis of GBP/USD using the daily time-frame


After slumping to below 1.200 during the trading sessions on September 3rd, GBP/USD staged a significant reversal throughout the remainder of the week as price (during one session) breached the 1.2300 round number/handle.

 Sterling experienced similar gains versus many of its peers during the trading week as traders brushed aside the PMI data from IHS Markit illustrating that U.K. construction was now in recession with manufacturing, while the services sector is only just above the 50 level, the demarcation between expansion and contraction.

 Meanwhile, institutional level analysts began to speculate where price of the major pair GBP/USD could find itself, if the U.K. Parliament continues to arrest control from the Tory government and a soft Brexit (in name only) occurs, or the U.K. public have a confirmatory vote and choose to remain. Predictions suggest that a remain decision could see GBP/USD initially rise to the 200 DMA currently sited at 1.2750, with the 1.3000 handle being a realistic longer-term target.

 Alternatively, a no-deal Brexit could witness GPB/USD slump to 1.1000 in the opinion of this analyst @Bloomberg. For swing-traders in particular GBP/USD displayed text book behaviour during the week as the U.K. government imploded. On the daily chart the currency pair’s price reclaimed the 50 day moving average, a position it hadn’t traded close to for several months. Further technical analysis on the daily time-frame reveals the extent of the bullish movement in GBP/USD. 

 Left on their standard settings, stochastics aren’t overbought on the daily T.F. the MACD has remained bullish and the RSI has printed consistent readings above 50. The price-action, observed by way analysing the Heikin-Ashi closed bars, indicates continued bullish sentiment.


 When observed on the 4hr time frame a slightly different picture emerged for GBP/USD during the final hours of Friday’s trading session as the major currency pair closed down -0.41%, which could suggest market participants are looking for further confirmation with regards to the Brexit situation, before making any sustained bullish commitment.

 Left on their standard settings the MACD is marginally bullish, the stochastic lines have receded from the 80 overbought level, whilst the RSI reading has also began to retrace.


 High impact calendar events and data for this week


There are three key high impact calendar economic events this week which could have a significant effect on the value of the three currencies: GBP, USD and EUR. During Monday’s London-European session at 9:30am U.K. time, the U.K. ONS (official national statistics) agency will publish the latest GDP figures relating to the U.K. economy. Now whilst all eyes have been on the recent political theatre, it must be noted that Britain’s economy has been flirting with recession.

 Reuters forecast a quarterly GDP figure for the U.K. of -0.1% following -0.2% in the previous quarter, two quarters in series of negative growth is called out as a recession. Therefore, sterling will come under intense speculation if a recession is confirmed, particularly if the U.K. prime minister continues with his narrative of threatening to defy the rule of law in relation to Brexit.

 On Thursday September 12th at 12:45pm U.K. time the ECB will reveal its latest decision regarding the key interest rates, borrowing is expected to remain at zero percent with the deposit rate at -0.40%. A monetary policy statement will accompany the announcement and thereafter, at 13:30pm, the president of the ECB Mario Draghi will deliver his last press conference speech before stepping down from his position. Opinions are mixed as to whether or not Mr. Draghi will bow out with a significant announcement of further monetary stimulus, or simply deliver forward guidance consistent with previous statements.

The euro is sure to come under speculation during the ECB events, CFDs online traders would be advised to remain vigilant to the economic calendar publications which are listed on our website for your convenience: https://www.zulutrade.com/calendar

 Calendar events this week which are likely to impact on the value of USD includes the latest USA CPI figures, forecast by Reuters to come in at 0.1% month on month when the data is published on Thursday at 13:30pm. On Friday September 13th the latest retail sales figures are published, data which historically fails to move the needle concerning forex, unless the readings miss or beat the news agencies’ forecasts by some distance.


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