Over the past month, it seems that almost daily a Brexit trade deal could be reached. However, comments from both sides have changed seemingly almost every hour, causing volatility in GBP pairs. This past week, traders appear to believe that some type of deal will be done, therefore causing Sterling to go bid! What could happen to GBP if a deal gets done this weekend, while the markets are closed?
GBP/USD
GBP/USD is up nearly 2.25% this week on hopes that a Brexit deal will be reached. After Boris Johnson imposed a new deadline of Sunday night last weekend, the pair gapped higher as officials announced talks would continue this week. GBP/USD traded from the bottom trendline of the upward sloping channel and broke out yesterday. Today there appears to be some profit taking ahead of the weekend, as headline risk is a factor.
Source: Tradingview, FOREX.com
If a deal is reached, traders will be looking for the pair to gap higher on the Sunday night/Monday morning reopening. Resistance levels to watch are the Feb 2018 lows near 1.3711 and the April 2018 highs near 1.4376. Much of the market has been pricing in a deal this week. Therefore, if there are strong indications that a deal will not be done, watch for last Fridays lows of 1.3134 to be reached, then the September 26th lows near 1.2675.
EUR/GBP
Much of the same (but opposite) can be said for EUR/GBP. The pair formed a shooting star candlestick last Friday and gapped lower on the reopen Sunday night. The pair has been oscillating around the apex of a longer-term triangle since it broke higher out of the descending channel on December 2nd. Today, it appears as though there could be some profit taking, and EUR/GBP is up nearly 0.5% today.
Source: Tradingview, FOREX.com
If a Brexit deal is done over the weekend, levels to watch for the pair are the November 24th lows near 0.8875 and the April 30th lows near 0.8670. There is longer term support near 0.8600 and the February 17th lows near 0.8282. If there are strong indications that a deal will not be reached, watch for last Friday’s highs near 0.9230 and the March 19th highs near 0.9500.
GBP/CAD
GBP/CAD moved in a similar fashion to GBP/USD over the last week. After putting in a low last Friday near 1.6769, price gapped higher on Monday and is up 2% this week. Price broke through trendline resistance yesterday from the highs of November 23rd near 1.7274, however failed to close above it. Today there appears to be profit taking as GBP/CAD remains below the trendline.
Source: Tradingview, FOREX.com
If a deal gets done, there is room for price to move right to longer-term horizontal resistance levels near 1.7800, 1.8050, then 1.8425. If there is language suggesting a deal will not get done, watch last Fridays lows near 1.6770 down to March 20th lows near 1.6544 and longer-term resistance near 1.6345.
Remember that the levels mentioned are not guaranteed levels where support or resistance will hold. They are only levels where something could happen, and traders should be aware of them. As always, traders should use proper risk management, especially if trading during possible high volatility events.
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