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Brexit: odds for harder exit on the rise

Market Analysis

EURGBP ,H4 and Daily

Brexit: The odds for a hard exit from the EU appears to be increasing. The Guardian newspaper reports that EU leaders will refuse widen talks and stick to their insistence for the British government to make greater concessions with regard the financial divorce settlement, although, aware of her fragile political standing in Westminster, plan to at least try to soften the blow by publically praising her efforts. The article cites one EU diplomat saying that they feared it was “50-50” whether there would be an agreement at the next EU council summit in December. Meanwhile, a group of hardline Brexiteers in the ruling Tory party have written to PM May exacting that the government should walk away from negotiations if the EU continues to refuse to talk about trade. The EU has been refusing to open discussions on trade and transition until divorcing terms are settled, something which angers Brexiteers as it breaks a cardinal rule of negotiation, that putting everything in the negotiating pot at the same time would increase the scope for compromises to be made. Brexiteers argue that being prepared to walk away without a deal would greatly strengthen Britain’s hand, and force the EU, which also has a lot to lose in a hard Brexit scenario, to start talks on trade.

The pound weakens against Euro since Monday, after warnings about Brexit from the OECD and various business groups , along with shaky political backdrop, with the ruling Tory party mired in infighting at a crucial time in Brexit negotiations, and with most pundits seeing an outside risk of there being another general election if the Tory party’s fragile link with the Northern Ireland’s DUP breaks.

Today Sterling came under the cosh following a sizable UK retail sales miss, and dove further by some 50 pips with EURGBP rebounding to 0.8975 high. As per 4-hour chart, the pair is traded above the 50 and 200 period MA, while it is extending the upper Bollinger Bands pattern. Hence on the back of Hard Brexit , a Daily entry was taken at 0.8976, with the anticipation of retesting the  50.0 Fibonacci level at 0.9025. Support was set at 0.8910 – 0.8920.

A confirmed break and hold above the 50.0 Fibonacci level, will triggered another target up to 0.9065 which is in between 50.0-68.1 Fibonacci level.

 

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Andria Pichidi

Market Analyst

HotForex

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