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GBP & FTSE Volatility for May's speech

September 22, 2017

Theresa May is due to deliver a speech later today regarding Brexit. The markets will keep a very close eye on Theresa May’s speech which will happen in Florence this afternoon.

 

In the speech Theresa May will outline the details of the UK’s negotiating stance after the UK formally leaves the EU at the end of March 2019. Yesterday, parts of May’s speech was already leaked and among other things it was confirmed that May will propose a two-year transition period after Brexit takes effect.

 

In this article I will only focus on technical indications the charts are providing us with. I will cover both the upside and the downside on the GBP and the FTSE. It will no doubt be an eventful ending of the month as aside from the possible volatile Brexit speech, we also have the New Zealand parliamentary elections and the German elections over this weekend. 

 

Let's begin with cable (GBPUSD).

 

Based on what the weekly chart is showing I do see that price action is right now at an important resistance level. The right shoulder of this reversed head and shoulders pattern has been completed but before we see the up move towards logical 1.45 target (based on average H&S movement.) we could witness a downside towards the "neckline support" which is roughly 400 pips away from current price action. (support around 1.32).

 

Let's head over to the 4-hour chart for more details on the short-term side. 

 

 This is a zoomed in 4-hour chart of GBPUSD. As you can see price action has been trending in this channel for 7 days now and is indicating bearish pressure on cable. 

 

I have a sell trade here, I entered at 1.35572 and put a tight SL at 1.35797 (22.5 pips) but added a TP down to the bottom of the channel at 1.34663 (90.9 pips).  Depending how price action behaves I will think of moving my TP down to the neckline about 338 pips away fro  my entry price. At the time of wiring I am a little over 10 pips in profit and will look to move my SL to breakeven at 20+ pips in profit. 

 

Let's move over to EURGBP's 4-hour chart.

 

 Here we have another indication of weaker GBP, at least temporarily. EURGBP has created a double bottom right at the key support level (check it on the daily and you'll see what I mean). Price action is also trying to break the important 30 EMA and once and if that is done, I will they say that we have a solid indication that the GP will be weak. Until that happens I am fairly uncertain.

 

All in all, I am trading GBPUSD down at the moment and I will not be touching EURGBP. 1 trade at a time. 

 

Lets quickly go over the FTSE.

 

Before I go into the FTSE, remember that we released an article on selling the FTSE yesterday. So we are already short the FTSE. 

 

 Why are you selling the GBP and FTSE???

 

Excelletn question, I see weakness on both the GBP and FTSE today, I do see both pairs heading in the same direction for the first time since Brexit. (note that when the UK voted for Brexit both GBP and FTSE lost value, while the FTSE quickly recovered later on). 

 

I see the 7300 area being a major resistance for the FTSE at this point and I think if it is reached we could see more pressure on the FTSE. 

 

Keep in mind that Brexit might just cause complications for the 100 UK companies listed in the FTSE. Especially the "trade" part of Brexit, so we could witness weakness in the FTSE and the GBP today. 

 

I could of course be wrong so remember the rule... ALWAYS USE STOP LOSSES.

 

Thats all I have for you...

 

 (peace out)

 

 

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