STLG/USD Declines Following Cabinet Brexit Approval
|STLG/USD Declines Following Cabinet Brexit Approval – Hits Support above 1.2696 - What next?
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Wednesday night’s/Thursday morning’s news confirms U.K. Cabinet approves Prime Minister Teresa May’s Brexit plan – But rumours circulate over a ‘vote-of-no-confidence’ which would challenge her continued leadership – Stlg/US$ declines hard but tests downside support above 1.2696
U.K. Prime Minister Teresa May was successful in persuading a majority cabinet to approve here Brexit mandate but at some cost. A damning statement read in Parliament by Tory backbencher Jacob Rees-Mogg criticised the deal whilst the Brexit secretary Dominic Raab resigned accusing the EU as blackmailing Britain.
Tension are running high, but what does that mean for the currency, Stlg/US$?
In recent months, the Elliott Wave model shows Stlg/US$ unfolding into a similar path as other major currencies versus the US$ dollar. That means there’s only a limited short-term effect from the Brexit drama and various news stories that has been unravelling over the last couple of years. The more important driver is the US$ dollar cycle which resumed its 7.8-year decline last year.
Like most other US$ dollar currency pairs, Stlg/US$ has been engaged in a temporary corrective decline this year which has forced Stlg/British Pound lower against the dollar from last April’s high of 1.4377. This corrective downswing remains incomplete, targeting levels towards 1.2374+/-, max. 1.2062+/- over the next several months – that’s consistent with comparable declines in the Euro/US$ too.
But shorter-term, we expect to see a push higher following overnight declines with key support at 1.2696. Whilst holding above 1.2696, there are two probable scenarios unfolding, one which pushes Stlg/US$ higher now towards 1.3492+/- (see fig #1) and the other towards 1.3200+/- (see fig #2). Both allow a decline afterwards as the final sequence of this year’s correction, to either 1.2374+/- or max. 1.2062+/-.
Conclusion
The Brexit approval is not the final piece of negotiation as the stage now turns towards the possibility of a ‘vote-of-no-confidence’ triggering a leadership challenge. But such actions are seen to be submissive and subsumed into the Elliott Wave model of price-projection which means that whilst levels hold above 1.2696, the short-term outlook is at least bullish.
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