EU Withdrawal Date Set, Pound Takes the Hit

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With the Australian Labour Day passed, there is no time to relax in the current market, and we’re back straight into the major storylines of the week.

GBP/USD dropped to three-decade lows after the post-Brexit bloodbath, as new UK Prime Minister annouced the date to formally withdraw from the EU. With the first quarter of 2017 now set in stone, Cable reignited the panic and was hit hard all over again.

We last week talked about the key GBP/USD level which we’ve kept marked on the Cable daily chart below, and the re-test and failure at this level exaggerated the move lower:

GBP/USD daily

GBP/USD daily

You can see price on the daily at the lows and the move away from that marked level making things look even more shaky.

Just keep in mind that every man and his dog are now short Cable and that while many questions around just how the UK is going to go about the leaving process and what that’s going to mean for business and trade, having set a deadline is a huge step forward in clearing some of the uncertainty that is the main cloud hanging over the Pound.

With new trade deals will come confidence that things aren’t as bad as a sensationalist media and persistent, agenda driven political left is talking. Things will start to fall into place and a short covering rally could very quickly Spur Cable to range highs to begin.

Keep thinking outside the box and where the biggest risk of a re-pricing may lie.

EUR/GBP daily

EUR/GBP daily

EUR/GBP is the same on an inverted scale, and if you zoom out on your own MT4 charts and take a look at the weekly, you can see just how important the current zone that price is pushing up into is.

On the Australian calendar, we get Governor Philip Lowe’s first RBA meeting and the market is expecting no change to the current 1.5% cash rate.

Before the big decision out of Martin Place, we do however have Australian building approvals (and tier 3 ANZ job ads if you’re really keen), but neither are expected to have much of an impact on the price of the Aussie with the RBA barely a few hours later.

AUD/USD daily

AUD/USD daily

The Aussie is making another run at that resistance after a very shallow 75 or so pip pullback highlighting the control that the bulls have on this market at the moment.

With the RBA now less likely to cut rates as well as the continued failures of the Fed, we’ve been playing for this breakout for a while and that price action featuring a shallow retrace into short term support followed by an immediate rip back through resistance is very promising if you’re an Aussie bull.

Enjoy the week and best of probabilities in your trading!

This Monday

CNY Bank Holiday

AUD Building Approvals m/m

NZD RBNZ Gov Wheeler Speaks

AUD Cash Rate

AUD RBA Rate Statement

GBP Construction PMI

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This is a guest post originally apppeared on Vantage FX. Reposted with permission.

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