Further volatility was seen in this market yesterday following Theresa May’s cabinet meeting in which there was apparently a positive attitude towards the newly established Brexit deal. This caused a spike back to the refined fibonacci region before falling lower to close as a spinning top candle.
While the markets remain hopeful, Sterling edges ever lower as it attempts to price in the ‘no-win’ event. Granted, some scenarios may be considered better than others for the future of the Pound (i.e. a deal opposed to no deal), however, in the medium term, the Pound is in for a rocky ride regardless of Brexit outcome- UK GDP following the event will almost inevitably fall in spite of the potential longer term economic benefits of the deal.
Despite the positive potential of yesterday’s news, we have to remember that there are still many hurdles for May to overcome before this deal is put into action, including gaining the confidence of parliament. The moving averages are pointing to the upside and currently supporting price action, however price remains below the 1.3000 major resistance level. This suggests that my original bias is still valid as we wait to see 1.2845 initial targets. There is the potential for further consolidation here but should price manage to close above the 1.3000 then we’ll be looking back towards the highs around 1.3140.