No Brexit, abandon mission abandon mission

Posted Monday, September 5, 2016 by
Skerdian Meta • 2 min read

We don´t really know what will happen to Brexit. We will take a deeper look at it in the next live market update, what has changed and what has not. But from a trader´s perspective, all this looks a little brighter now. We don´t know what´s going on inside the head of the UK leaders or what plans they have for this process, but as forex traders, we can only see what the market thinks of Brexit, the effects of it on the forex market and hopefully forecast where it will take the GBP next. 

In the first half of August, the economic data from business side of the UK economy painted a very gloomy picture, almost all sectors in this category fell in deep contraction. But, on the second half of August, the economic data showed that the consumer side of the economy remained upbeat. In fact, the weaker pound helped pick up the inflation and boost the retail sales, with a little help from the foreign tourists. 

Lat week we saw that the manufacturing PMI jumped a record of 5 points, from 48.3 previously to 53.3. The construction sector also improved a lot from July to August but it still remains in contraction. This morning the services sector set another record  when it jumped by 5.5 points to 52.9. These numbers put the UK economy right where it was before the Brexit vote. 

Looks like the after-shock of the Brexit vote is dissipating quickly. As we explained in our August monthly review, the investor fear is very dangerous and it might spur economic crisis. But as it seems, that fear is wearing off, which I´m very happy about since the UK is one of my two home countries.

The GBP doesn´t seem very impressed though. GBP/USD jumped about 70 pips but has given up those gains and it´s threatening the 20 moving average on the downside. My fingers were feeling itchy to open a long term forex signal in this forex pair since the 1.3350-70 is a resistance level. I´ve mentioned this level several time this week, but I got cold feet in the last moments.

200 pips higher is where we´re looking to open a long term forex signal in this forex pair

What if the UK economic data showed steady improvement? What if the FED ducks again and leaves the interest rates as they are? You know, there are two halves which make one forex pair. There are too many contradicting factors right now for this forex pair so we´re deciding to lay off of it, at least until the price gets to 1.35-36 region, which will give us a much better risk reward ratio for a long term sell forex signal. 

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