The pound corrected way beyond my expectations, even though my final bear target was 2800 few weeks ago, but didn’t expect it to come so sudden and in such a disbalance with euro. Last week, EURUSD was ranging up and down, ended pretty much where it started and yet, GBPUSD dropped 500 pips, which is rare and should to be “fixed” by the market in the coming weeks. The market simply overreacted to Boris Johnson’s new UK internal market bill which overrides parts of the Brexit deal already agreed upon. Next week, we will see its second reading being discussed in the House of Commons, so lets see if it goes through in its current form or if it will be changed along the way. There seem to be many Tory rebels as it is, so even the vote in the House of Commons is not 100% sure, let alone the next step, which is House of Lords, where conservatives don’t even have a majority. And on top of that, a brexit deal should be done with the EU before year end, anyway, so then this bill wouldn’t matter anyway. Like I said, the market simply overreacted to this “news”, without thinking it through. And when retailers keep selling pound next week, banks will gladly buy it cheap to take them out.
Below is the daily and H4 chart, we can see it broke an uptrend channel on thursday, but failed to make it much lower on friday, week ended with a strong bottoming below 2800, which indicates a bull move on monday, depending on its strength, we can determine further levels. First, bulls need to break above 2860(friday’s double top) and stay there. When that is done, 3030 will be next big level and after that 3150-70 and finally 3240-3320. We have FED on wednesday and BoE on thursday, so enough volume for big moves. Lets see if it goes up and if yes, how high…
