Free Profitable Forex Newsletter
Hey! This is Philip with the latest Free Profitable Forex Newsletter!
It’s going to be a very busy and volatile remaining two days of this Fx trading week. I am not giving a trade idea with specific entry/target levels this week, mainly because the uncertainty of these events is high.
The risks are mainly related to the UK Parliamentary election today and the US-China trade war, where investors are expecting an announcement from Trump regarding the planned December 15 tariffs.
Since the UK election is immediately in front of us, let’s focus on it in this week’s newsletter.
Guide: How to trade the UK election?
The UK goes to elections today. Here’s your guide if you decide to trade GBP today and in the following days, although, of course, it would be absolutely right if you decide not to.
The uncertainty is high when trading any election in markets, and it will be the same this time with the GBP currency as well. Of course, in such situations, everyone is advised to control their position (lot) sizes, place stop-loss orders accordingly, and even stand away from trading GBP pairs completely.
With that said, let’s talk about potential scenarios and specific levels where GBP could trade as a result.
What are the expectations, and what is in the price?
The expectations are for Boris Johnson and his Conservative party to win a small majority of around 340 seats. Such a scenario should support GBP further higher.
The smaller the win for the Conservatives, the more GBP is likely to decline in disappointment, as it will be more difficult to get the Brexit deal passed in Parliament.
But, perhaps, the strongest moves and best trading opportunities will occur if Boris Johnson and the Conservatives don’t win the majority that is expected. In such a case, GBP should sell-off, and that should be an attractive opportunity for selling the Pound.
The bigger the surprise in the election results, the bigger the moves in GBP pairs we can expect.
Below is a chart of the GBPUSD pair with 4 possible scenarios of the election and the likely destination of GBPUSD in reaction to the results.
Note: I’m using the GBPUSD chart to illustrate the potential scenarios, but all GBP pairs will react similarly to the election result tonight.
There is greater potential for Selling GBP than for Buying it
As illustrated in the chart above, the greater potential for trading opportunities will be for selling the Pound than for buying the Pound. This is, of course, the less likely scenario, hence why there would be greater moves if it becomes a reality.
GBP has already appreciated notably in recent weeks in expectation for a clear Conservative majority and in expectations for a subsequent resolution of Brexit. This automatically makes the potential to the upside smaller as a lot of it is already reflected in the price (driven by all the expectations).
In a scenario where this doesn’t happen, there is a great room for disappointment and GBP selling. In a case of a hung Parliament (no Conservative majority), GBPUSD is likely to quickly tumble below 1.30 and then below 1.28 in the next few days (as indicated by the quadrants in the chart).
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When will GBP pairs start to react?
Expect the large reaction to happen at 22:00 local time when the exit poll will be published. This exit poll is known to have a high accuracy in predicting the actual outcome of the election, so investors will surely start to speculate with GBP’s price as soon as it is published.
Additional large moves in GBP pairs may follow once the actual (real) election results will start to be revealed later in the night. It’s also likely that the largest moves in GBP will occur over the night (the mid and late Asian session) and in the early morning of the European session tomorrow.
Still, UK Election Polls are rarely wrong
However, keep in mind that still, the most likely scenario is for the forecasting polls to be right and things to go as expected.
Considering this, the most probable scenario is a muted reaction in GBP (as indicated with the above chart), at least in the very near-term and the following days.
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Trade signals from the past week
- December 05, 2019 – Pending Short USDJPY trade, still not triggered as USDJPY hasn’t broken the support trendline or reached the resistance (sell) area.
TOTAL: 0 pips in the past week
TOTAL: +2490 pips profit since October 1, 2018
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Thank you!
High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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