Watch out on Tuesday !!!

On Tuesday 17th January we could see the biggest Sterling moves since the flash crash of the 6th October 2016.
On this day Prime Minister Theresa May is due to stand before a crowd of diplomats and  dignitaries at Lancaster House and deliver her much anticipated vision of Brexit [here]”.

Its difficult to see how this speech is going to boost the GBP, in fact there’s a high likelihood the GBP will be crushed.
In a speech where she is expected to discuss whether Britain will remain in the European single market, which allows free trade across the bloc, and customs union, which lets goods move across borders without customs checks – she is expected to confirm her intention to be outside both and as the customs union effectively forbids countries from signing their own trade deals there’s seems little room to manoeuvre or negotiate.

Its either out or in.

With Chancellor Hammond admitting in an interview with a German magazine that the “UK we could suffer from economic damage at least in the short-term” if it is left with no access to the EU [here] we could see a real run on the GBP with GBP/USD lows at 1.1992 threatened.

Should the 1.20 handle go, we are in unknown territory technically so recent support levels down here do not exist.

The risk on Tuesday is clearly to the downside and even if we get a less dovish statement than expected its unlikely to lift the GBP very far.

GBP/JPY and GBP/AUD look to be the pick of the pairs to SHORT.

138.82 on GBP/JPY looks vulnerable and if this level breaks the 116.30 low is under threat.
On GBP/AUD, the 1.6207 looks under threat and a break opens 1.4360.

Assume nothing though.

This is the Foreign Exchange Market. Every trader was anticipating a run on the USD in the event of a Donald Trump victory and we saw a dollar rally
but what is certain is that any GBP LONG positions need to be covered.

(There is a distinct possibility that the markets will price in this GBP negative news on Sunday’s open. I’m expecting a big gap open across all GBP pairs as soon as the Australian FX market opens in less than an hour. I also expect much volatility in the Asian session – it could be a roller coaster).

 

 

 

 

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