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A timely reminder of the number one factor driving the pound in trading

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Cable experienced its sharpest fall in 15 months on Friday


With Chinese and Japanese markets closed today and a notable lack of key economic events, trading today may be a little uninspired and so far we’re getting very little action ahead of European trading. It’s a good time to look back at the events that transpired on Friday and the most notable of which was the pound’s lackluster performance as Brexit risks reared its ugly head.
The charts and the breakdown of technical levels against the dollar last week would’ve warranted further upside for cable but trading the pound these days is a whole other beast. No matter what charts may show you, ultimately it’s all about Brexit headlines. And it will continue to be up until we get some semblance of a deal or no deal outcome.
In the meantime, expect more rumours to come in the next two months to inject the kind of volatility we saw on Friday in the pound. The issue of the Irish border remains the an impasse in negotiations and until now there doesn’t seem to be any solution to the problem at hand.

Putting aside the fundamentals, the technical picture also shows that buyers are more cautious to put their foot in the water again. Although price dipped to support levels on the daily chart seen at around 1.3050 and 1.3067, price continues to sit under the 100 and 200-hour moving averages since the break below in US trading on Friday.
That means near-term bias remains more bearish for the time being. The key for sellers is to break below the support levels mentioned and as for buyers, it’s all about getting back above the key hourly moving averages again.
If you’re keen on trading the pound, you have to accept the risks that come with it. Right now, that’s Brexit headlines. It’s something you can try to plan your trade around and limit your risk according but at the end of the day you’ll be dealing with the unknown here as nobody has a crystal ball to foresee what sort of headlines will come about in the next two months.
So, if you do decide to dip your feet into the water, make sure you understand that there’s a chance that you may get bitten by whatever that lies beneath. Don’t be hasty in trading decisions or feel that you’re missing out. There’s always another trade on another day in another currency if this isn’t to your liking. Always remember that.

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