STERLING (GBP) TOUCHES AN 18-MONTH LOW ON BREXIT CHAOS
Sterling continues to slip lower with GBPUSD touching levels last seen in June 2017 late yesterday after UK PM May was found in contempt of Parliament and ordered to publish the legal Brexit agreement in full. In addition, MPs passed an amendment that gives them more of a say on the final Brexit bill if PM May’s agreement is voted down in Parliament next week, which looks very likely. The full legal advice on the Brexit deal will be published at 11:30 GMT and it will be closely parsed by both sides of the House. The House of Commons will also commence day two of five debating the Withdrawal Agreement at the same time.
Sterling slipped lower after yesterday’s announcement and just broke below the GBPUSD 1.2662 18-month low print. The pair nudged back above 1.2700 as the market began to digest the back-up amendment which makes a no-deal Brexit increasingly unlikely. There seems to be growing support in Parliament for a Norway+ agreement, a deal that would be better for Sterling than a no-deal.
GBPUSD remains weak but may have found short-term support at the 1.2660 level although this looks likely to come under pressure. Yesterday’s bearish engulfing candle suggests that there may be another move lower, while the pair trade below all three moving averages. The RSI indicator continues to move lower and still has room to go before it enters oversold territory. Initial resistance remains between 1.2780 and 1.2820.
IG Retail Sentiment data show that 71.6% of traders are net-long GBPUSD, a bearish contrarian indicator. However recent daily and weekly positional shifts suggest the GBPUSD may soon reverse higher.