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Brexit Scenarios, Sterling Report and GBPUSD Forecast

Parliament is about to enter another decisive week in the Brexit deliberations. On Tuesday MPs will vote on Theresa May’s deal, and, if it falls, on a no-deal Brexit and the question of extending article 50.

BREXIT

Calendar and Scenarios

March 12th: Parliament votes for May – EU revised plan.
Expectation: NO
If Parliament approves the plan;
1. Sharp Rally of GBP pairs.
2. March 21th – March 22nd: EU votes fort he agreements
3. Trade Talks between UK-EU begins.
4. Sterling may slow down because of the uncertainty.
If the UK Parliament rejects the agreement;

March 13th: Parliament votes for No Deal Brexit.
Markets Expectations: NO
If Parliament approves No Deal Brexit;
1. Sell off in Sterling
2. Boe projection: 25% decline in Sterling. %8 decline in incomes.
3. BoE may go to a rate hike operation to protect the Sterling.
4. Increase in the Global Uncertainty.
If UK Parliament says NO to No Deal Brexit

March 14th: Vote on delayed Brexit
The market is pricing this scenario. The bullish trend in Sterling started with the expectations of delayed Brexit.

If Delayed Brexit Scenario becomes validated, we may see a rather small Sterling rally after the parliament’s “YES” to a delayed Brexit.

However, a delayed Brexit will not be the end of the uncertainties. That is the reason for the latest retracement in Sterling.
At the point, the most positive scenario on the table is the second Brexit referendum.
The Labour leadership, having seen its alternative soft Brexit proposals defeated, has formally announced support for a second referendum, suggesting this to be the logical consequence of the formal party conference position established last autumn.

If this scenario –the second referendum- gains weight we will see a sustainable Sterling Rally. We must say that the Sterling is very cheap now in the mean of real effective currency strength.

GBPUSD

As seen on the weekly chart, we see a measured move up printing.  After making historical low 1.19000 by an Algo Crash – in 24 hours-, Cable tested 1.45000 key resistance. The fresh bearish movement was triggered by Brexit and FED’s rate hike cycle. Dips completed at 1.25000 and Cable entered into the recovery period. The target of the formation is 1.48000 but a few fundamentals are needed and it is not the subject of this forecast. 1.30100 is the key support. If GBPUSD makes daily closings above 1.30100, we could see the pair moving towards 1.34500 – 1.38000 with an accelerated bullish trend.

On the smaller charts, as we have published last week, an inverted head & shoulders pattern became validated.1.32200 is the resistance and the invalidation level of the pattern is 1.29800.

Cable broke 1.32200 and tested 1.33500 resistance. But this breakout attempt and the bullish move were not sustainable due to Brexit uncertainty. The pair pulled back towards 1.30100 support and ended the week at 1.30120.

“YES” to revised May-EU Plan: ( Probability 0.01% ) Our trade plan is to buy and add long at the closing above 1.32200 targets 1.34500  and 1.37000 with a stop loss below 1.30100.

Delayed Brexit: ( Probability 99.8 % )  Our trade plan is to buy and add Long at the closing above 1.32200 targeting 1.34500  and 1.37000 with a stop loss below 1.30100.  Second Referendum Scenario: Targets 1.4000-1.45000

No-Deal Brexit: To sell GBPUSD targets 1.2700 and 1.23000. And if we take “BoE’s projection of 25% decline” into consideration, this sell of may continue towards 1.2000.

Gamblers: They may buy or sell. No worries, only the table wins.

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DISCLAIMER: This is a technical analysis study, not advice or recommendation to invest money

GBPUSD Forecast: Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. Chartreaderpro does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility

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