The pound is continuing to keep firm as we digest the election results
It is all over. The Tories have it by a long mile as the ‘red wall’ has been breached. The ominous signs in the early results pretty much spoiled all the fun as there proves to be no drama on election day in the UK this year.
It’s all but a coronation parade for Boris Johnson at this point.
As for the pound, cable is continuing to knock on the door of the 1.35 handle. That is proving to be an area where sellers are leaning on and where we’re seeing some profit-taking.
But if buyers can keep above the 61.8 retracement level @ 1.3453 to end the week, there is a good momentum to try and breach the figure level next week as cable continues to build on more bullish momentum upon a firm break of the key weekly moving averages.
A move towards 1.38 may be on the cards next with 1.40 also on the horizon as short positions continue to get squeezed out:
There is no doubt that there are plenty of Brexit risks that still lie ahead for next year. But at this point, that is another trade for another day.
Looking at EUR/GBP:
The pound is also making good strides as price trades to its lowest levels since the 2016 Brexit referendum. If sellers can keep a break below key support levels around 0.8305-34 to end the week, that’s a good platform to build on further downside momentum.
In short, the technical picture for the pound has never looked brighter in quite some time. Couple that with still extended short positioning and more immediate upside fundamentals, there’s good reason to expect the rally to extend in the short-term.
That said, just be wary on how quick markets may allude to Brexit risks in the coming weeks. If the focus starts to turn towards the fact that we’re going to see more difficult negotiations – on the future trade relationship – as well as a no-deal Brexit, the pound may find its party cut short a little too abruptly.