Technical Analysis

The long-term cable chart shows how high the stakes are in the month ahead

Cable is still severely beaten down

That sky is the limit for the pound. If Theresa May can get a deal through, or even if Brexit is called off, then the upside for cable is massive.

Eleven years ago cable was at 2.10 –a full 7700 pips above spot.

No one is saying it will get back there but 11 years ago that’s exactly where it was an surely no one could have predicted it would be at 1.33 now despite a crushing US-led housing recession. It takes a bit less imagination to see it back at 1.50-1.60 where it was before the Brexit referendum was called. Even less so when you consider all the potential UK investment that has been sidelined or scared away for the past three years. If money rushes back into the UK, the pound can overshoot on the upside.

Technically, the break today above the September high is positive and a monthly close above it would be great. A rise to 1.44 next month isn’t out of the question if May can somehow get a deal through.

What makes it especially attractive is the risk-reward. What’s probably going to happen is that May will fumble, Brexit will be delayed and there will be more political uncertainty. But at the same time, still removes economic uncertainty. It’s clear to me now that a no-deal Brexit is an impossibility. It’s either this deal, which leaves the economic relationship with the EU generally untouched, or it’s back to being in the EU. It will still be messy getting there but it’s a win-win in the long-term.

ForexLive

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