Hammond Sets Up Next Trading Opportunity On the British Pound

(This is an excerpt from an article I originally published on Seeking Alpha on September 25, 2016. Click here to read the entire piece.)


The UK's Chancellor of the Exchequer, the Rt Hon Philip Hammond MP
The UK’s Chancellor of the Exchequer, the Rt Hon Philip Hammond MP

Source: UK Government

Nothing shows better the edginess of traders than a quick trigger reaction to rumored news.

On Friday, September 16 rumors ripped through the news headlines that the UK’s Chancellor of the Exchequer, Philip Hammond, is willing to implement post-Brexit constraints on immigration at the cost of losing access to the European Union (EU) market. The British pound (FXB) promptly sold off on the rumor. The sell-off inflicted notable technical damage across sterling pairs. In nearly one swipe, the previous gains from good economic news withered away.


GBP/USD punches through support at its 50-day moving average (DMA) on the Hammond news.
GBP/USD punches through support at its 50-day moving average (DMA) on the Hammond news.

GBP/JPY similarly cracks through 50DMA support.
GBP/JPY similarly cracks through 50DMA support.

{snip}

The reaction in markets may be too hasty because Hammond has previously insisted that he can effectively maintain access to the EU market despite Brexit. {snip}

As nerves cool down, I suspect the British pound will reverse Friday’s loss in due time and perhaps even resume its previous momentum. {snip}


The U.S. dollar surges on strong inflation data but stops short of resistance at its 200DMA.
The U.S. dollar surges on strong inflation data but stops short of resistance at its 200DMA.

{snip}


The British pound is still holding 50DMA support against the Canadian dollar as a trading range extends into its third month.
The British pound is still holding 50DMA support against the Canadian dollar as a trading range extends into its third month.

Source for charts: FreeStockCharts.com

Be careful out there!

Full disclosure: net long the British pound

(This is an excerpt from an article I originally published on Seeking Alpha on September 25, 2016. Click here to read the entire piece.)

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