The Pound and the Brexit Saga
One man's words can make a difference, or in this case - Boris Johnson's words - the Mayor of London. As markets closed on last Friday, quickly after that news came up that a deal between the EU and UK has been reached. All nice, pound got a little boost on the aftermarket and we went into the weekend. Saturday was also a productive day for the both sides and on Sunday, Johnson dropped the bomb with his statement that will probably support the cause for Britain to exit the European Union.
Done. All of you longs out there on the pound probably didn't woke up in a bright sunny mood on Monday. The opening was with 67 pips gap and price didn't even tried to cap it and didn't mind the gap at all and the steam falling began and continued. Full week of pound pummeling. Monday it dropped with 230 pips, Tuesday with 137 and yesterday with 134. Bleeding continues and price will most likely close (this time) bellow 1.40. Price action will tell if this will be true. Closing bellow 1.40 will be a precedent, because it never happened before. Not even in the Great Recession of 2008-2009. But don't get tempted to buy and go away from lets say 1.38500 yet. Remember the Scots's situation a year ago? Investors fled from rapidly, pushing down gbp/usd hard and when the referendum results came in and Scotland remained in the EU - gbp/usd quickly, very quickly recovered its lost ground. Sounds like the same scenario, except that we have a influential man on the other side this time - the Mayor of London who actually sent a personal message to David Cameron before announcing his actions. Good ol' friends...
Brexit risk of course jumped to the roofs and probability for such event is getting higher. Cameron set on Sunday a referendum date - 23th June.
Both charts source: ZeroHedge
The daily chart shows this - all possible resistance levels breached and price currently is very closed for an attack at 1.39000. Fear will weigh in hard for the gbp/usd. With Boris Johnson's behavior I won't be surprised if he drops another bomb - changing his mind. His history shows that he has been in a self-conflict for 10 years about the matter of the future and place of Britain in the European Union.
Sensitive matter indeed and time will tell how things will unfold and ultimately - the results of the referendum. Good idea will be to buy the tops or just stay away and look at it if you are not confident enough. I personally won't touch the pound until this saga finishes and the dust clears up.