Brexit is an abbreviation for "British exit," referring to the U.K.'s decision in a June 23, 2016 referendum to leave the European Union (EU). The process of Britain staying or not staying in the EU has been entertaining to say the least. The decision to leave the EU was very close, with just under 52% of voters opting for Brexit. So it’s understandable why this drama has been going on for more than two years. The decision to leave/not leave the EU is split right in half.
The new British Prime Minister Boris Johnson said he is taking Britain out of the EU with or without a deal, regardless of the law Parliament passed requiring him to ask for an extension to the Brexit deadline if lawmakers have not approved a deal. In response to the law, Johnson said he would rather be “dead in a ditch” then request a delay.
Needless to say, volatility in the British Pound has become normal as of late, despite the speculators (including myself) moving to the sidelines until the dust settles. It even has the computers designed to trade on Brexit-related news confused because every other headline seems to contradictory the previous headline.
After spending almost the whole year betting Brexit woes would weaken the pound, traders are now on red alert as the potential for a divorce deal sends sterling flying higher.
The U.K. currency jumped the most over two days since 2009 after Thursday’s positive meeting between Prime Minister Boris Johnson and Ireland’s Premier Leo Varadkar. That was followed by further supportive comments, before a recommendation that Britain and the European Union enter into line-by-line negotiations on a Brexit accord.
Markets are taking these developments to be a game-changer. One-month options have never shown a stronger bias in favor of contracts to buy the pound, based on Bloomberg data going back to 2003. U.K.
The “pivotal moment” of a meeting between the British and Irish leaders was enough to convince strategists at Deutsche Bank AG to terminate a recommendation to sell sterling.
Now from a big picture standpoint, specifically the monthly chart, price formed a double bottom and is leaving the monthly demand at 1. 2000. If I just paid attention to price action and not the news, this is very, very, very bullish. Thus, the chart suggests, I should only be looking for longs.
However, on the daily chart, price came into a daily supply today and it the 200 moving average. So come Sunday night, probably Monday during the US Session, I'm going to decide whether to take this set-up short or not. It all depends on the price action on the 1 hr and the 4 hr chart.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.