Yet another hurdle cleared, but is it enough to get it through parliament?
The near-term chart shows that bias now turns more bullish for the pair after the headline spike here. It’s a great hurdle to clear in terms of Brexit progress but this is very much an expected one. It sets out the tone for this Sunday’s summit where European leaders are definitely expected to give the green light to the deal barring any unforeseen circumstances.
But the key thing to look ahead will be is this deal enough to get through the UK parliament in a meaningful vote?
The draft text doesn’t state a clear end date to the backstop as the transition period is said to be possibly extended for “one or two years”. And with regards to the Irish border, it says that both parties are to “consider technological solutions to prevent a hard border on Ireland”. That is not the stuff that will reassure parliament members surely.
But as traders, we trade what is in front of us. Right now, markets are focusing on one key hurdle at a time and the more hurdles are cleared, the less worry is there for traders. Before we reach a meaningful vote in the Commons, the deal has to go through European leaders and that is where we’re at now.
For cable, the pop sees price move above the 200-hour MA (blue line) and looks to hold a break above the 61.8 retracement level @ 1.2913 as well. However, looking at the daily chart:
There is resistance seen here at 1.2925 from the 3 October low. Technically, that and the July low @ 1.2958 will be key resistance regions for the pound to break above before moving to test the 1.3000 handle.
Do be reminded that US traders are away today in observance of Thanksgiving so that plays a part in terms of liquidity in markets. In my view, I don’t see this improving May’s chances of winning a meaningful vote in parliament so in essence, nothing has changed if you’re talking about key details.
With that reasoning, I find it tough to argue a case for cable to rise above 1.3000 in the near-term unless something changes. It’s still very much selling the rallies at this point.