Today’s sterling sell-off was initiated yesterday when the UK Prime Minister Theresa May announced that the UK will be ready to trigger Article 50 by the end of March 2017. At the open of the week the pound gapped down significantly against all its major competitors. The UK Chancellor of The Exchequer (Finance Minister – Philip Hammond) also added to the sentiment in a speech at the ruling Conservative party’s annual conference.
GBPUSD gapped from Fridays close at 1.2976 to 1.2916, the 1.2900 level quickly gave way and the pair broke under 1.2850 as the North American trading week began. The post Brexit low 1.2790 is clearly in sight and the fourth quarter end of year targets remain to the downside at 1.2500.
GBPJPY also gapped from Fridays close at 131.46 over 60 pts to open at 130.80, it currently trades at 130.15. EURGBP rose to a record high earlier today at 0.8746 and with strong Oil prices and very weak sterling my GBPCAD trade from September 22 hit Target 2 for a net gain of 372 pips.
Gap trading is an art within itself and although most gaps are eventually filled, the trick is knowing when to enter in the opposite direction. The sentiment, thanks to the fundamental news action, remains very much against the pound in the short term at least.
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