Ok. Brexit.
I usually try and avoid the rather distasteful topic of Brexit in these blog posts because it is an issue which is too complicated to trade or analyse. There is no point in forecasting what the day-to-day movements of the pound will do and therefore I generally sit far away from cable.
That being said, I became quietly bullish on cable over the last few days because I do not believe that a no-deal Brexit is going to occur and I do believe that the Forex market is exaggerating the likelihood of a catastrophic no-deal.
Theresa May today has asked the EU for an extension and Donald Tusk has asked members of the EU to be open to a "flextension", or to use my preferred phrase, a "Brextension".
Consequently, I, and many others, are starting to question the likelihood of Brexit ever occurring - or at least in the near future. There was a time when the chance of a no-deal was rising a few weeks back as the EU seemed to take an increasingly hard-line against the UK. However, I would put the chance of a no deal at this time at less than 10%.
Will the UK ever leave?
The current cable price is £1=$1.303 and I have just opened a long position in the pound. For the time being, a rise towards £1=$1.33 is quite feasible based upon previous technical levels, although there are some significant resistance points in the charts to get there. Ultimately, if the extension is approved - and if it lasts for almost a year as Tusk suggests - then the pound will almost certainly rise.
Ok, I'll admit that I continue to worry about a no-deal, and therefore I have been very careful with my stop losses for this position to ensure that I am not waking up on the 12th of April to a margin call from my broker.
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