Cable Continues To Feel The Pressure Of A Possible Hard Brexit & US Strength

Cable has been able to trade within a fairly tight range over the past 4 trading sessions, with most of the price action staying within a high of 1.2260 and a low of 1.2103. This new level was reached after the overnight flash crash which took price to touch a 31 year low at 1.2020 on October 6th.

The market bounced back the next day, but has since traded lower again, at levels the market feels comfortable with, until there is new data. Pressure is building from investors wary about a hard Brexit and the consequences on the British economy. A hard Brexit would cause the Bank of England to keep interest rates lower for longer and continue with quantitative easing. Both factors which will keep Sterling low or lower.

Tomorrow at 9:30am we will be getting data for the unemployment rate and the Claimant Count for the UK; the latter is expected to be higher at 2.6K after last month’s 2.4k, while the unemployment rate is expect to be stable at 4.9%.

There have been some surprises with economic data since the referendum; many of them have seen actual data releases beat forecasts, with subsequent rallies in Cable. If you think GBP/USD could reverse its trend on the back of better than expected unemployment data then all you need to do is buy GBPUSD with Deal Cancellation protection. This feature allows you to take a position and set up a maximum stop loss, which if hit during the first hour, will only cost you the premium you paid to buy Deal Cancellation protection.

Deal Cancellation gives you the option to close a trade, during 1 hour, losing no more than the premium you paid, while allowing you to gain from any positive movement. The screenshot below shows that to sell £28,000 would cost €21.69 in Deal Cancellation protection.

If the market rises from 1.21976 you would be able to close your trade for a profit less the cost of the Deal Cancellation protection. Let’s say price increases to 1.22876, your profit would be €286.35 - €21.69 = €264.66, while your maximum risk for one hour would be €21.69.