10:28, 26 February

Eyes off Resistance at 1.32 on Brexit Referendum

The last two weeks has seen a resurgent sterling as it climbed back towards the key 1.32 level, after spending the previous three weeks falling away strongly from the same key resistance level at 1.32. In doing so it was heading back towards the other key level at 1.27 which has supported the currency pair well in recent months.
The sterling enjoyed a very positive January as it has moved from below 1.27 up to a three-month high at the resistance level around 1.32, before the recent decline.

Starting in mid-December, the GBPUSD had slowly but steadily climbed higher from a two year low below 1.25 up to the current key level of 1.27 and beyond. As expected, it met some resistance from the 1.27 level at the end of last year as multiple attempts to push higher were thwarted and now that it has cleared, you could expect the pound to receive some support from this level should it be called upon.

In early December, the 1.27 level gave way to immense selling pressure, after the sterling was again enjoying much needed support from this level as it had firmly established as a key support level as the currency pair had enjoyed considerable support from this level on several occasions in the few months prior. Should the GBPUSD drop through the support at this level, then it could fall considerably further with no obvious support levels nearby.

After a narrow majority of voters called for Brexit in a June 2016 referendum, Britain remains as divided as ever.  British Prime Minister Theresa May upset some when she suggested that parliament may not be able to vote on her Brexit deal until 12th March, only 17 days before Britain is scheduled to leave the European Union (EU).  This increases the probability that U.K. politicians will this week move to delay Brexit beyond 29th March, in order to avoid a 'no-deal' Brexit.  Just as the main opposition Labour Party said it could eventually support a second referendum, the EU has opened the door to Britain postponing its exit from the bloc beyond the 29th March deadline.  European Council President Donald Tusk said he had discussed the “legal and procedural context of a potential extension” when he met with PM May, at the recent EU-Arab summit in Egypt.  “I believe in the situation we are in, an extension would be a rational solution but Prime Minister May still believes she’s able to avoid this scenario,” Mr Tusk told a closing summit press conference.  The EU has been watching the situation closely with growing concerns that the UK will depart the EU without a deal, risking turmoil for both sides of the Channel.