After weeks of headlines regarding the status of Brexit heading into the October 31st “hard deadline”, things have been pretty quiet the last two weeks, as the decision was made to extend the deadline to January 2020 and hold elections on December 12th.  This is essentially another vote for Brexit.  If Boris Johnson ends up with a majority, Brexit will happen sooner than later.  However, if the Labour Party and Jeremy Corbyn are able to claim a majority, there will most likely be a second vote on the Brexit referendum.  December 12th is just under a month away, and volatility has slowed.  However, as we get closer to the elections, watch for comments from all parties as they try to persuade voters.  According to the Telegraph earlier today, the Brexit Party said they have stepped down from 43 non-Tory Party seats.  As a result, Sterling went bid as this is considered Brexit friendly.

On the headline, GBP/USD spiked 40 pips.  This may not seem like a big move, but with the low volatility we’ve had lately, this was a welcome move (for those long GBP).  However, is GBP/USD just biding time until the elections?  On a weekly chart. The 1.2800/1.3000 level seems to be a perfectly normal place to pause if price were to advance further.  In early October, there was a good deal of speculation that Brexit may indeed happen (after a few years of negotiating).  GBP/USD moved from near 1.2200 to near 1.3000 in two weeks.  We have been in consolidation mode since then, forming a flag formation.  The target for a flag is the length of the flag pole, added to the breakout point of the flag.  If price we to break above 1.3000 soon, the target is near 1.3600, over 600 pips higher! 

GBPUSD

Source: Tradingview, FOREX.com

 

Why was this a normal place for price to stall? 

  1. Horizontal resistance and prior lows from March 2019 (which now act as resistance)
  2. Near the psychological resistance level of 1.3000
  3. 38.2% Fibonacci retracement level from the highs of April 2018 to the lows in September 2019
  4. 61.8% Fibonacci retracement level from the highs of March 2019 to the lows in September 2019

As we get closer and closer to the December 12th elections,  if the markets feel there will be a clear winner, it will begin to price the potential outcome into the market.  If it appears Boris Johnson and the Conservatives will have a majority, GBP/USD could be near 1.3600 in a hurry.  If it appears Jeremy Corbyn and the Labor Party will win, GBP/USD could be down near 1.2200 just as fast.  Watch the headlines as we get closer to December 12th!

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD looks heavy after Friday's bearish outside day

EUR/USD risks reporting losses on Monday, having charted a bearish outside day candlestick pattern on Friday. The dollar will likely remain bid with markets no longer expecting the Fed to cut rates before the November 2020 Presidential Elections.

EUR/USD News

GBP/USD recovers Friday’s losses to 1.3150 as Tories top UK election polls

GBP/USD keeps the recovery mode intact near 1.3150 while heading into the London open on Monday. The spot seems to cheer the Tory lead in all the polls for this week’s UK election. 

GBP/USD News

Forex Today: US dollar buoyed by NFP, trade jitters ahead of a Big week

Forex today experienced a sense of caution in Asia this Monday, as Sunday’s dismal Chinese trade data combined with looming US Dec. 15 tariffs overshadowed the latest trade optimism. 

Read more

Gold: Sidelined after biggest daily decline in four weeks

Gold is lacking a clear directional bias in Asia, having registered its biggest single-day decline in four weeks on Friday. China's data may embolden President Trump to take more aggressive measures. 

Gold News

USD/JPY treads water around 108.60 ahead of a Big week

USD/JPY keeps its range around 108.60, as the yen bulls look to take advantage of upbeat Japanese Q3 data. Further, negative Treasury yields and S&P 500 futures weigh down on the spot. All eyes on FOMC and Trump's Dec. 15 tariffs. 

USD/JPY News

Forex Majors

Cryptocurrencies

Signatures