What a disaster for Mrs. May. From a majority to a hung parliament. The pound reacted dreadfully on the exit poll, leading to a loss of approximately 200 ticks finding an initial base at 1.2700. <\/p>\n
This analysis is for slightly longer term positioning and as of next week I will resume uploading intraweek trades that I shall be taking, well in advance of entry. <\/p>\n
So, we are currently quite muted going into the weekend. I do not expect anything hugely drastic since May has said that she is not going to resign and is likely to form a minority government with the DUP. <\/p>\n<\/p>\n
You can see from the chart above that the support created from spiral has been breached. Instantly when I saw the drop after the exit poll last night it was a classic 'break of the ice' - a low volume fall through support or resistance in a topping or bottoming pattern. Price faces some resistance early morning (red line) and I was building a short position in my head from then. <\/p>\n
Don't get me wrong - longer term, I am bullish cable. I think that in 12-18 months we will regain 1.40 (I have the same opinion on EURUSD if you note my previous article) but I believe that these markets really do enjoy shaking out positions. This is why I have notes the downside zones and the key price level for me is 1.2350\/40. This is where I am looking to target. Why? Well my old friend COT positioning on sterling comes to mind. <\/p>\n<\/p>\n
We can see from the COT data that sterling non commercial positioning long has increased drastically over the last month or so. This uncertainty from political weakness gives a certain viability to traders wanting to hold sterling longs, and it's likely that CHFGBP and JPYGBP will see flows into them short term. This would indicate a fall in price and a cascade of stops pretty quickly. Interestingly, looking at CME options, 1.23 has the highest volume currently. I'm going to be honest and say that I am not an options guy so I don't know the ins and outs, but it seems pertinent so it's something that I'd mention (and if someone wants to give me any lessons on options trading I would be most open to it!). <\/p>\n
The upside risk is of course still there. If we have a break above 1.3025 then I'll scratch the trade (where my stop will be) because that we will likely form key support at the high of the late April - current range (similar to how we are forming resistance at the low of the range currently). <\/p>\n
So the trade - <\/p>\n
Short at market sub 1.2850 (next week) <\/p>\n
Stop at 1.3025 <\/p>\n
Target of 1.24\/2350 (the latter if you feel it will extend fully through demand) <\/p>\n
Disclosure: I\/we have no positions in any stocks mentioned, but may initiate a short position in GBPUSD over the next 72 hours. <\/p>\n
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. <\/p>\n
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Read more: <\/p>\n
Cable: Where Are We Headed After This Political Meltdown? - Seeking Alpha<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" What a disaster for Mrs. May Continue reading