Some encouraging GDP data out of the UK to today. Preliminary GDP Q3 YoY was expected 2.1% and came out 2.3% and the QoQ GDP was expected 0.3% and came out at 0.5%. So naturally we saw movement in the FTSE and cable. The GBP took the news initially well spiking the GBP against the USD to 1.2271. However the overriding ‘Brexit’ fundamentals means that no rally ever seems to last long.
The H1 candle where the most spiking action happened was a prime candidate for a Fibonacci retracement. This is an over extended candle which in my reckoning means the 80% of the time it will retrace to 50% and if this is the case and we close below we are almost 90% sure it will make a new low. Which cable did below 1.22030.
The short term relief rally I the GBP simply cannot over turn the over whelming ‘fear factor’ of what will happen post article 50 being triggered in Q1 2017. There has been rumors of UK banks looking to relocate, May’s own leaked tapes of her going against her own advice and the uncountable division that Brexit has caused in the country, the government and the all-important city of London.
Now the GBP reach 31 year lows, it is not the time to think where or when will it bounce. Every conceivable level is a potential break point. The inevitably will be a floor in the GBP as the UK is still a strong economy and the option of safe haven currencies it rapidly diminishing globally. It was be a brave investor to pick to lows long term.
In my view I am selling into the new lows and looking for key psychological levels to be broken before buying short dips upwards. A key level at 1.14252 a 161.8% Fibonacci expansion level is one area that I think is good to buy 2nd time around. 1.15 will be a natural target to break but should offer longer term traders some option to start to build a position of future value.