Well, that quick pullback idea of mine quickly fizzled! As it turns out, the Brexit High Court ruling might be a gamechanger for the pound so I decided against taking this GBP/NZD short trade.
Thank goodness I decided to sit tight and watch price action during yesterday’s London session first before setting any orders. I was actually trying to play it safe ahead of the BOE statement but it was the British High Court ruling that did a number on the pound!
On the pair’s 1-hour time frame that I was looking at, long green candles formed and busted right through the Fib levels and area of interest at the 1.7000 handle. Because of that, I dropped my short-term bearish bias as a longer-term correction may be in the cards.
Besides, the court ruling that basically rids the U.K. government of the power to solely invoke Article 50 could give lawmakers more time to iron out their negotiating game plan before going head to head with EU officials. Remember when PM Theresa May said that the official negotiations will start by Q1 2017, ultimately setting the Brexit date at March 2019? That might be out the window for now as PM May would need to get the approval of parliament first, and that’s likely going to take more than a few months.
I’m still long-term bearish biased on the pound because this Brexit will usher in a lot of uncertainty sooner or later, but I’d rather wait for those major pullbacks to be able to short at much better levels. Besides, the U.K. government will still appeal this decision to the supreme court by December 7 so the pound might have time to erase some of its recent losses until then.
Moving foward, pound price action could be driven by headlines once more so I’ll be on the lookout for opportunities to catch trends once direction is established. Be careful out there!
As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups.
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