GBP Tumbles After Brexit Reality – Going With The Break Or Going With The Bounce?

Posted Friday, April 7, 2017 by
Skerdian Meta • 2 min read

The harsh reality of Brexit hits again – the UK economic data this morning was horrible. About an hour ago, the Halifax hour price index remained stagnant, but the worst was yet to come.

Manufacturing production shrank by 0.1%, industrial production shrank by 0.7%, while construction output declined by a massive 1.7%.

That wasn´t all though, the UK trade balance deficit grew from 11 billion to 12.5 billion. There were a lot of arguments from Brexiters about how exports would grow and how trade balance would improve now that the Pound has lost about 20-25% of its value, but that isn´t happening.

In fact, it´s getting worse. UK is a net importer, so if UK exporters want to produce more they have to import all the raw material, so it´s a nil/nil situation.

GBP/USD has lost about 40 pips after the release, but we´re close to 2 moving averages which have provided solid support over the last three weeks.

Buy for a bounce or sell the break? 

As you see on the H4 chat above, buyers have become active every time we touched these two moving averages. So, the 100 and 200 SMAs have been a perfect buying opportunity during this time. They come around 1.2400-20 which in itself is a solid support level.

So, are you going to buy here with the first target at 1.25, or are you waiting for a break of 1.24 to short the hell out of this forex pair?

Personally, I would prefer to buy down here because the H4 chart is almost oversold. But, I´m afraid GBP bulls might have gotten some real Brexit jitters. If the bulls get jitters there won´t be anyone to push the price up, we can´t do it alone.

Besides that, the US employment report is due later today. The report might ruin our technical analysis. Well, if not a long term forex signal, we might give the 1.24 support level a try with a short term signal and try to catch a small 20-25 pip bounce.  

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