Analysis

Sterling falls as UK PM Johnson responds by calling to arrange for no-deal Brexit

GBP/USD falls by about 100 pips earlier than settling nearer to 1.2900 now

GBP/USD H1 16-10
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Cable was treading near its 200-hour MA (blue line) earlier @ 1.2960 earlier than UK PM Johnson provided a shock response to the EU summit yesterday in calling for preparations of a no-deal Brexit by January subsequent 12 months.

That noticed sellers push worth all the best way all the way down to 1.2865 close to the week’s low, earlier than recovering some floor amid a check of the 50.zero retracement stage @ 1.2879 as nicely.

At the moment, worth motion is risky however sticking round 1.2880-00 for probably the most half.

All issues equal, the dangers are nonetheless tilted to the draw back for the pound based mostly on what we all know thus far. If Johnson does observe via on pulling the plug, the financial penalties could be horrible and it is not one thing the market ought to take flippantly.

That mentioned, the primary consideration remains to be one thing that will overwhelm the narrative within the quick time period and weigh on the pound amid fears of a ‘worst-case situation’.

Be careful for a break beneath this week’s low @ 1.2863. That may very nicely open the door for a push in direction of the 100-day transferring common @ 1.2836 subsequent and sellers may acquire extra momentum if that offers manner within the coming periods.

As for dangers to look out for now, it is going to be the EU’s response to the matter. However I reckon within the subsequent week or two, either side can be taking part in poker and saying that they’re high quality with pursuing a no-deal end result till somebody decides to succeed in out.

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