The undone victory for the GBP
Yesterday, we were fearing that a strict Brexit deadline announced by the UK PM Boris Johnson and other ministers may put excessive pressure downwards on the GBP in the short-term and the long-term.
Now, we see that all the gains that the GBP won on the Conservatives’ victory are undone. Moreover, the British pound seems to be preparing to continue falling against the major currencies in the observable future.
Against the euro
On the H4, the upsurge of EUR/GBP reached higher than where it dropped from on the day of the UK elections. More so, it crossed the 50-period and 100-period Moving Averages, now testing the resistance of 200-MA. The next big step would be the high of 0.8600, reached in November.
However, we see the consolidation and the slowdown of the current steep rise right at the resistance of the 200-period Moving Average. The Awesome Oscillator also shows that a high may have been reached, and the momentum for this particular upsurge has been exhausted.
Climbing further up requires additional power and most probably additional confirmation from the Conservatives side that they would not back down on their strict agenda. If such news comes in, we may witness the start of a gradual change in the overall trend. In addition, given the context of the situation and the commentaries already provided by the UK PM Mr. Johnson and his colleagues, the absence of any information disproving the rigidity of their plan may also serve as a confirmation of the looming hard Brexit. In this case, it will cause further weakening of the GBP.
Against the USD
Against the USD, the GBP has dropped to the level of 1.3100 where it started its leap on December 12, breaking through the 50-period Moving Average. On the H4, the price is currently testing the support of the 100-period MA, showing signs of consolidation. Same as in the case with the euro, it is likely that the price will stay at the current support level for a while, waiting for additional information to guide the market movement. It may show a slight movement upwards or go sideways. If it does cross the 100-period Moving Average, it would be a sign that the market indeed has little hope for the GBP in the context of hard Brexit.
Against other currencies
Most of the GBP currency pairs show a very similar dynamic, with certain variations. On the H4 of GBP/CHF, the price has crossed the 50-period, 100-period, and 200-period Moving Average on the way down. Currently, it is testing the support of 1.2813, left at the beginning of December. Crossing that line would mean the price aims at the level of 1.2680, along which it has been trading in October-November.
The impact of the announced Brexit agenda by the Conservatives is visible at the market. Now, the question is whether it will be a short-term disappointment or a start of a larger trend change.
To answer that, we need to follow the news and keep an eye on the price movement against the mid-term and long-term thresholds.