GBP/USD Stays Supported as EU Extends Brexit Deadline
The British pound dropped on Thursday but remained supported after the European Union granted the UK a substantial extension of the Brexit deadline – to October 31, 2019. This extension also has a provision whereby the UK would be able to leave the EU earlier if the British Parliament is able to pass a Brexit deal. Prime Minister Theresa May has already tried and failed three times to get her deal passed.
‘No-Deal’ Brexit Averted … For Now
At this point in the drawn-out and chaotic Brexit process, the worst case scenario for both the British pound and equity markets alike would be a ‘no-deal’ Brexit. Thursday’s extension by the EU helped decrease the likelihood of this happening, as it affords a significant length of time for the British government to come to a consensus on a Brexit deal. While the pressure on UK markets is far from lifted, at least there’s more breathing room for the time being.
GBP/USD Remains Supported
The chart above shows the British pound vs the US dollar (GBP/USD). Since the 1.2500-area lows of December and early January, the currency pair has been entrenched in a general rebound and recovery. Most recently, GBP/USD has been well-supported by its key 200-day moving average. It has also been trading in a rough uptrend channel for around the past five months.
New Brexit developments in the run-up to the extended October deadline could easily result in a breakdown of the pound. But if the currency pair is able to hold the strong support offered by both the rising trend channel and the 200-day moving average, the key 1.3300 level serves as the next major upside target. And any sustained rise above 1.3300 would likely confirm an extension of the GBP/USD’s recent recovery.
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Senior Market Analyst at The Technicals
A veteran global macro trader/analyst, Bart focuses on major market moves in currencies, commodities, fixed income, and global equity indexes. Bart stresses inter-market correlations and dynamics while keeping a close eye on risk. He has published countless market analysis pieces and has been a guest expert for a variety of major financial media. Contact Bart