After the Brexit vote the pound dropped 1,700 pips before seeing some relief. The pound has been since under enormous bearish pressure making a post Brexit low at 1.2794.
After the election of a new Prime Minister the pound rallied 630 pips to 1.3480; this level is crucial in our post Brexit analysis because the pound has been trading inide of this range.
The range´s resistance or post Brexit highs is what we call the bull break zone (1.3542 / 1.3478) and should the GBP/USD break with this area and buyers absorb all those sell orders we are going to see the pound rally at least to the 1.4000 / 1.4080 zone which was a big zone of demand pre Brexit. This is very unlikely though.
Last week we had the interest rate decision by the Bank of England and the market was positioned itself for a rate cut to 0.25%; the interest rate was maintined at 0.50% shocking the markets and the pound rallied 270 pips as a reaction, hitting those post Brexit highs we talk about earlier, keeping it rangebound.
The pound retested those highs giving us a great short opportunity in views of next meeting where more easing is expected to be announced and a rate cut made offical (this is still speculative). But the pound is still under great bearish pressure post Brexit vote and we plan on taking advantage of the downside that this currency can yield.
The Pound/Dollar is now trading in a bearish continuation pattern (wedge) but not only that, it has started to form a head and shoulders k of England announces more easing the pound could see inmense bearish volume come into the market and push price even further to get us even closer to parity against the USDollar. This of course is very speculative but what we know for sure is thta if the bear breakout zone in fact breaks the pound will depreciate rapidly against the USDollar.
[Orlando Gutierrez] of [www.snipethetrade.com]
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