Typically when I publish a commentary, it’s because there is a particular setup or trade idea on my watch list. But seeing as how I’ve received several requests for GBPUSD and the much awaited Brexit vote is just 24 hours away, I figured I would share some of the key levels I’m watching on the pound ahead of the big event.
To be clear, I’m flat at the moment and will not be trading again until next week. The next 48 hours will likely see extreme levels of volatility combined with unfavorable spreads and subpar volume. All in all, it won’t be an environment conducive to trading.
With this in mind, the levels below are what I’m keeping an eye on for next week and beyond. Any one of the areas below could trigger an opportunity once the dust settles from tomorrow’s vote.
Let’s start with the weekly chart.
The intersection of the 1.4740 handle with trend line resistance that extends from the 2014 multi-year high represents a confluence of resistance that if broken could offer favorable long opportunities.
Above that, the next levels of resistance come in at 1.5040 followed by 1.5440. Of course, a move above 1.4740 would only have a chance of materializing should the Remain camp come out on top.
If on the other hand, the Leave group wins the day, we could see a selloff of epic proportions. The first level of support comes in at 1.4347 followed by the June low near 1.4050, but it’s doubtful that either level would stand a chance at attracting a meaningful bid.
My gut tells me that if Britain decides to leave the EU, there wouldn’t be much stopping a slide below the current 2016 low at 1.3834. A drop of 15% or more would not be out of the question given the buildup to the event coupled with the magnitude of such an outcome.
Regardless of what happens, the upcoming vote promises to be eventful and will undoubtedly go down in the history books. But again, it’s my opinion that the best seat in the house for viewing such a volatile event can be found on the sidelines.
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