Pound Depreciates Ahead Of Brexit Trigger
MaiMarFX | Mar 29, 2017 06:58AM ET
The biggest story on Tuesday was the trend reversal of the British pound. Sterling reversed shy of 1.26 and dropped sharply towards 1.2350. The sharp sell-off was due to the much-anticipated Brexit trigger which will happen today. The formal Brexit process starts around 13:30 local time when a letter personally signed by U.K. Prime Minister Theresa May will arrive in Brussels.
May signed the historical document on Tuesday evening and it will be handed to EU President Donald Tusk today. Tusk will read out a statement at 13:45 (GMT+2) while May will address the U.K. Parliament about the same time. The uncertainty over terms of Brexit could weigh on the pound in the medium-term, so traders should generally prepare for further losses as long as the prospects of U.K. monetary policy tightening remain far off.
From a technical perspective, sterling bears should wait for a bearish break below 1.2340 in order to sell the pound towards 1.21. Nonetheless, there is also a risk of a short squeeze in short-term time frames which could occur through profit taking. We see a crucial resistance zone between 1.2530 - 1.2570 and it would require a renewed break above that area to shift the bias in favor of the bulls.
EUR/USD
The shared currency was unable to break above 1.0875 and therefore fell back towards 1.08. For the time being, the euro is holding above the 1.08-mark but this may change quickly as the Brexit trigger poses a risk to the euro.
Bearish scenario: If the euro falls below 1.0780 it may heads for a test of the lower support-zones at 1.0760 and 1.07. A significant break below 1.0680 could lead to further losses towards 1.06.
Bullish scenario: A fresh break above 1.0875 may prompt euro bulls to buy euros towards 1.0920/50.
The risk is however to the downside.
Here are our daily signal alerts:
EUR/USD
Long at 1.0840 SL 25 TP 20-30
Short at 1.0790 SL 25 TP 20, 40
GBP/USD
Long at 1.2470 SL 25 TP 20, 35
Short at 1.2375 SL 25 TP 30, 70
We wish you good trades and many pips!
Disclaimer: Any and all liability of the author is excluded.
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