Yields on core European bonds went for a slide yesterday as prices rose in response to the ECB's decision to leave its QE programme unchanged – for now at least. Elsewhere, the USD continues to make gains on its peers.
Article / 13 June 2016 at 11:15 GMT

Sterling caught in a Brexit sandstorm

Technical Analyst / Saxo Bank


Left for in, right for out? Photo: iStock

By Kim Cramer-Larsson

Of all the sterling crosses, GBPCHF is the one reacting most violently to the Brexit polls and with the respective central banks of the UK and Switzerland on tap this week, the potential for yet more fluctuation is there.

The pair is literally dropping like a stone approaching the April 2016 trough below 1.35. 

Bollinger Bands are widening while RSI and MACD still points lower indicating that it is very likely that GBPCHF should reach 1.35 within a few days. There aren't really any support levels before the April low. 

GBPCHF is closing in on a test of the 1.35 level

 Source: Saxo Bank

EURGBP break

Last week, EURGBP broke above its falling trend line. RSI tested the 60 threshold a couple of times but with today's move it has broken above confirming the weakening of the sterling.

The next resistance is at 0.81, namely the April peak.

EURGBP looking to test towards 0.81
EURGBP daily
Source: Saxo Bank

GBPUSD neckline

GBPUSD is dropping below the falling neckline from the shoulder-head-shoulder pattern that unfolded in the first quarter of 2016.

Friday's massive move took RSI below the 40 threshold and Bollinger bands are widening. Cable is approaching the lowest level in the March consolidation area at around 1.40.
That would also be the 1.786 projection level derived from the double-top pattern which is roughly the usually meeting price target*.
A slip below this strong support area could see cable hurtling towards 1.3750. 

GBPUSD is in sight of the March lows

GBPUSD daily
Source: Saxo Bank

*(See Bulkowski studies about double Top Patterns).

Trading the Brexit vote?
Find more analysis, insight and essential resources on our dedicated Brexit page.

— Edited by Martin O'Rourke

Kim Cramer-Larsson is a technical analyst at Saxo Bank


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