Charting the chop as the UK heads to the polls
- Sterling rallies into Brexit vote
- Next resistance at 1.5118
- Asian trade likely to be volatile
I'm a chart bod, so am not going to even try to make any "calls" on the way the vote will go, or the market's reaction. But what I can do (and where I think charts can come in useful in such situations) is look at the "bigger picture" levels that might come into play on any such extreme moves.
George Osborne has talked about a 10% depreciation in sterling on a "Leave" vote; George Soros has talked about 15-20%. I'm not sure whether this is before or after the 6.5% rise we've seen over the last six sessions!
This rally that we've seen in the last week or so has seen us from a low of 1.4012 last Thursday to a high of 1.4948 earlier today. I think it's fair to say this rally has been the result of an increasing lean towards a "Remain" outcome, and the Scottish referendum a few years back (amongst other examples) set a precedent for the "undecideds" to vote for no change when push comes to shove.
So let's look at some weekly charts and see what they tells us about the "big picture" levels:
GBPUSD weekly bar chart:
Current chart posture: Off the lows, suggesting a bottom is "in", but shy of 1.5118... for now.
EURGBP weekly chart:
Resistance: 0.7765, 0.7853, 0.7995, 0.8029, 0.8118, 0.8317.
Current chart posture: 2015 was one big bottom but we need to keep above 0.7510-50 to keep this alive.
Gilt futures weekly:
Resistance: 124.05, 124.45, 125.18, 125.73, 126.79, 127.50.
Current chart posture: Off the top and heading lower in the short term, but the bulls still look very much in charge on the longer timeframes.
FTSE 100 monthly:
Support: 6162, 6030, 5836.5, 5723, 5499, 5291, 4860.
Resistance: 6387, 6487, 6733, 6813, 7000, 7122.
Current chart posture: Recent monthly candles (i.e. for the last couple of years) whenever we've been off the highs have had long lower shadows which says dip buying is strong and evident. We need to clear 6400-6500 to mount a fresh assault on the all-time high of 7122.
— Edited by Michael McKenna