Mario Blascak, PhD
Independent Analyst
- The GBP/USD is trading down 0.8% at around 1.2760 as the debate in the House of Commons heats up ahead of the Brexit deal vote.
- There are four amendments to be voted for before the Brexit vote itself that is expected at around 20:00-20:30 GMT.
- The GBP/USD market is expectedly prone to large-scale abrupt moves as the stop-loss orders add to Sterling’s heaviness.
Sterling started the day of the Brexit deal being voted in the House of Commons at the upside at around the 1.2900 level, as it rose to the 8-week high above 1.2900 level on Monday. While continuously sliding lower, the slide below 1.2800 level was easy and swift as stops helped the downward move to 1.2760.
The parliamentary debate in the House of Commons is almost unisono voicing dissent with the Brexit deal that is widely expected to be rejected in a vote later tonight, with the direction for Sterling expectedly set by the margin of votes in a loss.
There are rumors suggesting the most common scenario taking a 100 votes margin as a reference base. In case the Brexit deal is rejected by less than 100 votes the market would expect Prime Minister Theresa May to bring the deal back to UK parliament for a second vote. A loss of the Brexit vote by more than 100 votes would send Sterling lower.
According to reports, the European Union diplomats have their own measure of 60 votes margin being the ground for hope with the EU possibly looking at new ways of setting the deal to get it approved.
Technically the GBP/USD broke a long-term downtrend on the upside with the hours before the Brexit deal vote breaking back into the downtrend. With the rejection of Brexit deal in the UK parliament widely expected and priced-in, the potential for the wild market moves is increasing. The margin of fewer than 100 votes is Sterling neutral-to-positive, depending on the actual number while above 100 is seen Sterling negative.
The technical oscillators like Momentum and Slow Stochastics are elevated and pointing downwards. The Slow Stochastics made a bearish crossover in the Overbought territory. With Sterling waiting for key Brexit deal vote later on Tuesday, the currency pair is set to move sideways. On the downside, the GBP/USD needs to break below 1.2700-1.2650 before targeting 1.2440, a 2019 low. On the upside, the 1.3000 is the next hurdle for GBP/USD.
GBP/USD daily chart
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