The Pound trades at the lower end of the 1.2700 – 1.2764 support level as investors fear that the Brexit turmoil will not end anytime soon. For now, it does not seem like the UK parliament will vote for the passing of the proposed Brexit deal between Prime Minister Theresa May and the EU. Such scenario will leave the UK with three options, each with their own associated risks. The first option would be the adjustment of the Brexit deal, but there is a high risk EU leaders won’t accept such scenario. The second option would be the UK going through another Brexit referendum, which will cause delays in finalizing the whole Brexit issue and lead to further uncertainty surrounding the future of the British economy. The final and most dangerous option would be a “no deal” Brexit, which might lead to a recession in the UK as BoE’s Governor Carney warned. Alongside any updates related to Brexit, Pound traders should also focus on the release of the UK’s Construction PMI figure.
The Pound continues to reject breaking above the 50-period moving average signaling strong bearish momentum surrounding the pair. For now, traders can either enter into a short position now or wait for a break below the 1.2689 support which will expose the 1.2620 support. On the other end, if sentiment shifted then prices will break above the minor 1.2829 resistance and expose the 1.2875 resistance level.
Support: 1.2689/ 1.2620
Resistance: 1.2829 / 1.2875