Finding Opportunity Amidst Overwhelming Uncertainties
Axi | Feb 13, 2019 11:44
Originally published by AxiTrader
- The Bank of England (BOE) kicked the can down the road, by deciding to hold interest rate at 0.75% on 7th February 2019. The next rate decision will release on 21 March 2019.
- Britain’s preliminary GDP QoQ dropped sharply from the nominal 0.6% to 0.2%.
- British Prime Minister Theresa May has been busy visiting Dublin and Brussel in a bid to gather additional support on her Brexit deal before the deadline on 29th March 2019.
As we expected, BOE forecasted Britain’s economy to weaken further in early 2019, which can be seen as taking a dovish stance. On Monday, there were a series of significant data released, and all of them pointed towards a potential deeper slowdown of the British’s economy. Its prelim GDP QoQ is now standing at 0.2% instead of the forecasted 0.3%. However, on a positive note, it is not as bad as it looks, compared to its European counterparts such as Italy and Germany; who are already in the negative regions.
It is already a known fact and also widely expected that major economies of the world are slowing down. In our opinion, the real issue lies with Britain’s political situation instead of their weak economic data. After the defeat on the Brexit deal last month, efforts to come up with an agreeable solution are currently underway. Next Tuesday, British Prime Minister Theresa May will be updating MPs on the latest developments. The fate of the country is at a crucial juncture now, and any possible results will have a profound impact on their currency as well as the economy.
From the technical analysis (TA) point of view, cable (GBP/USD) was on a sharp pullback mode for the past three weeks, and it is now in an apparent sellers’ market. We expect the slide to continue further towards the nearest potential support level of 1.275 regions. This selldown could happen as Investors sell pound (GBP) and buy up US dollar (USD), in an attempt to seek refuge from the uncertainties in the current market.
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We also foresee a high potential setup that can bag up to +100 pips on cross pairs such as EUR/GBP. As mentioned earlier, we expect the euro to weaken against the British pound soon. We will be looking for a short swing entry near 0.881 and the interim take profit (TP) level at 0.871.
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