The United Kingdom draws millions of tourists every year to attractions ranging from designer bags and watches to spectacular scenery and centuries old traditions and monuments. But even if you don’t have an impulse to book a Christmas trip to London, now is the time to be paying close attention to its financial markets.
The Brexit referendum confirmed on 24 June that the UK would exit the European Union, triggering a financial earthquake that saw the pound losing more than 1,000 pips against the dollar on the day of the result. Another fresh spike on 7 October has sent the pound plummeting to around the 1.2000 region, a level not seen since 1984. But has the bottom been reached? To me, the strong down trends on the weekly and monthly charts suggest the pound still has further to fall. While the 1.2000 level may hold up for a while, 1.0500 - which would be the deepest low since the end of the Bretton Woods system - seems to be a plausible longer-term prospect.
As a trader, this offers me great opportunities to capitalise on potentially extreme trending conditions. With the price pulling back into the daily chart moving average sell zone, a small bearish candle flickered yesterday. If the price breaks yesterday’s low, I would see that as strong indication the pound will retest 1.2000 in the near future.
And even if 1.2000 proves un-crossable for the GBP/USD, for us Aussies and Kiwis, the pound has already given up big psychological levels. Yesterday the GBP/AUD closed the day below 1.6000 and the GBP/NZD below 1.7000. The GBP/AUD may plummet to reach the bottom of around 1.4300, which it touched in 2013, while the GBP/NZD is in a free fall mode with no major low or support level visible on the charts. With such a big potential profit window, I will try to ride any upcoming movements on both cross rates. I will be watching out like a hawk for 1.6000 for GBP/AUD and 1.7000 for GBP/NZD to see if I can combine other technical factors for short trade opportunities.
In less than a year, the pound has depreciated around 22% against the US dollar, about 27% against the Australian dollar and roughly 26% against the New Zealand dollar. Whether you’re looking for high fashion, or have an inclination towards stately homes, don’t forget to keep an eye on the UK option as a Christmas destination.
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