The Weekly Update: Theresa May Brexit Speech and GBP

Theresa May (British Prime Minister) announced last week she will carry a brexit speech on Tuesday, 17 January, 2017. According to recent reports Theresa May is due to affirm Britain is prepared for a full exit from the EU, including access to the single market and custom union. Although Theresa May wishes to trigger Article 50 by March it is highly unlikely that will be the case. Our technical entries in GBP pairs and crosses were invalidated by the market aside EURGBP. We were initially planning to layer an entry order (sell limit), however ,due to weekend reports on a full brexit speech on Tuesday EURGBP is expected to marginally gap higher at the opening of the Forex market.

EURGBP Weekly Chart

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The Weekly Update: Theresa May Brexit Speech and GBP

EURGBP Weekly Chart 15/01/17

We have noted the potential for a top H&S at the beginning of last week. The gap higher will not invalidate the entry due to the monthly chart. As we know what triggered GBP weakness a short trade in EURGBP will greatly depend on profit-taking prior to Tuesday. If at the speech itself Theresa May avoids discussing future access to the single market GBP is likely to rally, however, we would rather be in the market prior to Tuesday. We should highlight that the speech may have a significant impact on numerous currency pairs and crosses and is unlikely to be limited to GBP. If we opt for the trade we are likely to exercise a fairly tight stop due to the risk event. We can exercise an entry order but we are uncertain whether if it is the best approach until the market opens.

EURJPY Weekly Chart

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The Weekly Update: Theresa May Brexit Speech and GBP

EURJPY Weekly Chart 15/01/17

We have also been tracking Euro yen since last week. The recent dip lower may have painted a right-hand shoulder of a reversed H&S. We are aware EURJPY is due to gap lower due to the reports that were published over the weekend related to the brexit. The gap lower will not invalidate the technical entry.

We highlight this will be a volatile week in most of GBP, EUR, USD and JPY pairs and crosses. The speech was scheduled to take place later this month, we are uncertain why Theresa May chose to reschedule the speech. If we may speculate, Mark Carney stated prior to the announcement that a brexit will do more harm the EU than to the UK. Theresa May thought it may be wise to begin applying pressure on the EU in order to have an advantage at the upcoming negotiations.

EURJPY Trade Alert

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The Weekly Update: Theresa May Brexit Speech and GBP

EURJPY Weekly Chart Ii 15/01/17

EURJPY long at market price (121.63)
Take profit: 125.00
Protective stop: 120.50
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 21 days

EURGBP Entry Order

We required a re-test of 0.8887 in order to initiate a trade at market price, which did not take place at the time of this writing. There are several ways of trading EURGBP via entry orders (sell limit). We are setting a higher entry price for EURGBP. If the pair corrects higher on Monday and does not trigger our entry we will re-assess our position for the pair. The current order is positioned for a short-lived spike on Tuesday should minimal activity be noted in EURGBP on Monday.

EURGBP sell limit order at 0.9010
Take profit: 0.8680
Protective stop: 0.9090
Risk Ratio (RR): 1 : 4 (approx.)
Estimated duration: less than 24 hours once triggered

16/01/17 UPDATE: We are modifying EURGBP entry order:

EURGBP sell limit order at 0.9065
Take profit: 0.8720
Protective stop: 0.9135
Risk Ratio (RR): 1 : 5 (approx.)
Estimated duration: less than 24 hours once triggered

We cancelled EURGBP entry order following heavy GBP buying as a result of Theresa May’s speech.

EURNZD Trade Alert

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The Weekly Update: Theresa May Brexit Speech and GBP

EURNZD Daily Chart 18/01/17

EURNZD long at market price (1.4918)
Take profit: 1.5380
Protective stop: 1.4780
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 14 days

Note: The long trade is initiated following moderate gains in the cross. We will absorb any retracements that may or may not occur as a result of the rally. The potential drawdown is a re-test of 1.4825. This is a monthly entry but we are using the daily chart.

19/01/17 UPDATE: EURNZD triggered the protective stop. 1.4825 was re-tested and prevented further weakness in the cross, however, strong US data pressured Euro and in turn spilled into EURNZD.

GBPJPY Trade Alert

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The Weekly Update: Theresa May Brexit Speech and GBP

GBPJPY Daily Chart 19/01/17

GBPJPY short at market price (141.68)
Take profit: 135.60
Protective stop: 143.45
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 10 days

19/01/17 UPDATE: EURJPY is trading at 122.47 at the time of this writing, we are closing 30% of the long trade at market price and shift the protective stop to the entry.

20/01/17 UPDATE: EURJPY is trading at 122.84 at the time of this writing.

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The Weekly Update: Theresa May Brexit Speech and GBP

EURJPY Weekly Chart 20/01/17

We are closing 20% of the long trade at market price, stop remains at the entry as this is a weekly entry.

23/01/17 UPDATE: GBPJPY is trading at 141.15 at the time of this writing, we are closing 20% of the short trade at market price.

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The Weekly Update: Theresa May Brexit Speech and GBP

GBPJPY Daily Chart 23/01/17

By the book we can lower the stop but we aware of the UK supreme court decision tomorrow. The market has already priced in a rejection, should the court accept the appeal GBP will be heavily sold.

23/01/17 UPDATE: EURJPY triggered the protective stop at the entry. Large stops were layered in EURGBP, the market initially tried to long GBP in order to trigger stops, when that failed the Euro was sold, which has triggered the stops in EURGBP.

24/01/17 UPDATE: GBPJPY spiked due to the London fix and then benefited from a weak yen due to a rise in US Treasury yields. Although the resistance is diagonal and we can tolerate a daily close above 142.17 we have noted the potential for a bullish flag in intraday time frames. We will not adopt a wait-and-see a approach. We cannot lower the stop but we are closing 30% of the short trade at market price (142.45).

25/01/17 UPDATE: GBPJPY triggered the protective stop, we have downsized our exposure as noted earlier. We are not re-entering GBPJPY.

The Weekly Update: Theresa May Brexit Speech and GBP

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The Weekly Update: Theresa May Brexit Speech and GBP
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The Weekly Update: Theresa May Brexit Speech and GBP