We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
GBP/USD
Mixed
USD/JPY
Bullish
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Bitcoin
Mixed
More View more
Real Time News
  • How can traders avoid #FOMO in trading? Start by implementing a well-heeled plan taking only four hours per week. Get your insight from @JStanleyFX here: https://t.co/vwUShQPc27 #tradingstyle https://t.co/CGm0ljirMR
  • RT @RedDogT3: Preparation is good https://t.co/ebtiX1o7cE
  • Euro trading near intraday highs following the release of October #ECB Minutes $EURUSD $EURJPY https://t.co/jwDWzsrdRN
  • #DidYouKnow the global trade volumes dropped by close to 10% amid the Great Recession. Want to know your #tradewars history? Get it here: https://t.co/f4loFVimeY https://t.co/EMk5g26vnI
  • LIVE NOW: Join Senior Currency Strategist @CVecchioFX as he talks about the most relevant information at the moment from the major central banks in the world. Register here: https://www.dailyfx.com/webinars/888096923?CHID=9&QPID=917720
  • ECB Minutes - Plea was made for patience as well as wait and see posture - Economic data raised questions as to whether weakness would continue for longer than expected in September $EUR
  • (Equities in the $SPX tend to come under pressure as spot $USDCNH rises due to increased US-China trade war risk, whereas a drop in spot $USDCNH - i.e. strengthening of the Yuan - typically provides an indication that trade talks are progressing and tensions are easing).
  • Chart of S&P 500 Futures $ES_F vs Chinese Yuan $USDCNH (inverted) I keep stressing the importance of watching the renminbi as a bellwether to broader market sentiment and risk appetite. It also helps gauge how traders are responding to the trade headline whiplash. #Stocks #Forex https://t.co/8WBNkBw0NB
  • Heads Up:🇪🇺 EUR ECB Account of October Policy Meeting (OCT) due at 12:30 GMT (15min) https://www.dailyfx.com/economic-calendar#2019-11-21
  • LIVE IN 30 MIN: Join Senior Currency Strategist @CVecchioFX as he talks about the most relevant information at the moment from the major central banks in the world. Register here: https://www.dailyfx.com/webinars/888096923?CHID=9&QPID=917720
Sterling Forecast: Brexit Pause Offers Range on GBP/USD, EUR/GBP

Sterling Forecast: Brexit Pause Offers Range on GBP/USD, EUR/GBP

2019-11-02 22:56:00
Rich Dvorak, Junior Analyst
Share:

STERLING TECHNICAL FORECAST: GBP/USD & EUR/GBP OFFER TRADING RANGE OPPORTUNITES

  • The Sterling looks sandwiched between major levels of confluent support and resistance which may broadly contain GBP price action as forex traders await key upcoming Brexit dates
  • GBP/USD and EUR/GBP could ping-pong back and forth between critical technical barriers with the British Pound anchored until Brexit clarity emerges from next month’s general election
  • Check out this Brexit Timeline for details on the history of Brexit negotiations with insight on Brexit’s impact on spot GBP and financial markets

Brexit has roiled the British Pound since the June 2016 referendum. Over the last two months, however, GBP price action has been shaken up overwhelmingly in response to growing hopes that UK PM Boris Johnson would deliver a long-awaited Brexit agreement, which sent the Sterling surging. Yet the PM has faced a gridlocked Parliament and although British MPs approved Boris Johnson’s Brexit deal, they refused to support his fast-tracked timeline to deliver Brexit. Consequently, Boris Johnson was forced to request another Brexit delay until January 31 next year, which was approved unanimously by the EU27 despite France’s initial reluctance.

BRITISH POUND OUTLOOK MIRED BY BREXIT UNCERTAINTY AS SNAP ELECTION LOOMS

PM Boris Johnson subsequently withdrew his Brexit bill and called for a snap election in pursuit of gaining majority in the House of Commons and delivering Brexit by breaking the longstanding impasse that has roiled the UK economy. As a result, there’s a major ‘Brexit question mark’ outstanding that will likely last until the upcoming general election results are finalized. Lingering Brexit uncertainty could thus keep the British Pound largely rangebound until clarity emerges over Boris Johnson’s snap election and Parliament’s subsequent capacity to pass necessary Brexit legislation.

GBP/USD PRICE CHART: DAILY TIME FRAME (DECEMBER 20, 2018 TO NOVEMBER 01, 2019)

GBPUSD Price Chart Technical Forecast Brexit Delay Snap Election

With that in mind – and keeping a close eye on UK election polls as traders speculate ahead of the December 12 snap election vote – it could be prudent to take a high-level approach when analyzing where the British Pound might head next. That said, GBP price action has recently compressed into a well-defined trading range underpinned by key technical levels of confluent support and resistance driven predominantly by the aforementioned Brexit developments. Spot GBP/USD has fluctuated roughly between the 1.28-1.30 handles since mid-October and these technical barriers could keep Sterling prices contained over the near term.

Also, options-implied trading ranges derived from at-the-money options contracts can also be used to highlight major areas of technical support and resistance with potential of keeping underlying spot prices generally contained. Mathematically speaking, 1-standard deviation options-implied trading ranges should encompass price action over the specified time frame with a 68% statistical probability. That said, GBP/USD 1-week implied volatility of 7.17% estimates that the cable will fluctuate between 1.2812 and 1.3080 over the next week.

GBP/USD PRICE CHART: WEEKLY TIME FRAME (JUNE 15, 2015 TO NOVEMBER 01, 2019)

Sterling Forecast: Brexit Pause Offers Range on GBP/USD, EUR/GBP

Looking further out with a focus on 1-month and 3-month GBP/USD options-implied trading ranges, which approximately aligns with the key upcoming Brexit dates of December 12 and January 31, we find that spot prices have generally ping-ponged between these important levels of technical confluence dating back to mid-2016.

GBP/USD 1-month implied volatility of 7.58% estimates that spot prices will fluctuate between 1.2665-1.3227 while GBP/USD 3-month implied volatility of 10.06% estimates that spot prices will fluctuate between 1.2299-1.3593 with a 68% statistical probability over the respective timeframes.

EUR/GBP PRICE CHART: DAILY TIME FRAME (JANUARY 24, 2019 TO NOVEMBER 01, 2019)

Sterling Forecast: Brexit Pause Offers Range on GBP/USD, EUR/GBP

Likewise, spot EUR/GBP has also coiled into a tight trading range over the last 2-weeks. With the expectation that recent choppiness in the British Pound will likely continue until forex traders are provided with more Brexit clarity, EUR/GBP price action could be broadly contained between technical support and resistance indicated by its options-implied trading range. EUR/GBP implied volatility of 5.93% derived from its 1-week options contract suggests that spot prices will remain relatively anchored between 0.8559-0.8701 with a 68% statistical probability next week.

EUR/GBP PRICE CHART: WEEKLY TIME FRAME (OCTOBER 18, 2015 TO NOVEMBER 01, 2019)

EURGBP Price Chart Sterling Technical Forecast Brexit Delay Snap Election

Applying the same methodology, EUR/GBP 1-month implied volatility of 6.54% estimates that spot prices will fluctuate between 0.8468-0.8792 while EUR/GBP 3-month implied volatility of 8.94% estimates that spot prices will fluctuate between 0.8247-0.9013 with a 68% statistical probability over the respective timeframes.

FOREX TRADING RESOURCES

  • Read up on Range Trading Basics to sharpen your knowledge on this popular trading strategy
  • The IG Client Sentiment Report provides details on market positioning and insight on the bullish or bearish biases of traders across several forex pairs, commodities and indices
  • Download the DailyFX Forecasts for comprehensive fundamental and technical analysis on major currencies like the US Dollar and Euro in addition to equities, gold and oil
  • Sign up for Live Webinar Coverage of the financial markets hosted by DailyFX analysts where you can have all your trading questions answered in real-time

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.