Jump to content

Brexit or not GBPUSD is going down!


Mercury

Recommended Posts

Everyone likes a firm prediction, if for no other reason than to gloat when it turns out to be wrong but at least it should offer an opportunity for people to agree or disagree rather than equivocal vacillations of "it could go up or down who knows"!  So before Brexit I thought I reaffirm my long held position that GBPUSD is nowhere near finished with it journey down and we may possible even see a return to 1984 parity levels.

 

Fundamentals

If you are a lover of fundamentals then then the case would be that the global economies are shot: no growth, no inflation and falling corporate profits despite unprecedented Keynesian stimulus.  Unemployment has stabilised and improved since the credit crunch but job quality/security is poor and pay rises virtually non existent as corporate squeeze costs to balance their budgets.

 

No wonder consumers aren't spending despite record low interest rates and massive early sales are once again in evidence.  In fact people are trying to pay down debt rather than leverage up on cheap debt, although corporates are doing the reverse but not to invest rather to pay for financial engineering to keep their bonuses flowing in despite falling turnover.

 

Some argue that central bankers (CB) will not back down and rather start things like helicopter money next and that will lead to inflation.  If it does it will be hyper inflation (bad for everyone and bad for the markets too) but more likely people will finally see that the game is up and all CB credibility will be lost leading to massive risk off and deflation/depression.  It may yet start with the bond market bubble bursting, watch those yield curves!

 

In this context Brexit is a grain of sand on the beach, although a Leave result would send a message that the Establishment is no longer trusted, which includes the central bankers, and could be the grain of sand that starts the landslide.  In such a case GBPUSD will drop like a stone.  Either way if you believe a big fall in markets is due (stock market bubble, bond market bubble, commodities bubble already burst and likely to drop further still) then there will be a flight to safety and that means Gold and USD.  The only scenario that would negate this picture is if you believe the bull market will run and run in perpetuity, or at least for another few years.  If anyone does I'd love to hear the argument.

 

Technicals

Looking at the technical analysis now (big picture on the Monthly/Weekly charts only) the monthly chart shows this pair has been in a Bear run since 1980, albeit with a strong retrace between 1984 lows and 2007 where the market turned right at the 76.4% Fib off the 1980 high.

 

Zooming in onto the Weekly chart (2nd chart) we can see the strong move down from 2007 high (wave C retrace high on the monthly) to 2009 (a wave 3 of 5) coinciding with the credit crunch stock market fall and rush to the safety of the USD (another crash will bring the same right?).  But since 2009 we have been in an extended retrace, which described a classic A-B-C pattern.  After an A-B-C come a motive (1-5) wave the other way (i.e. down) and that is what we are seeing but we have only had 1-4 so far and have turned into wave 5 in July 2014.  Note that the market has not yet made a fresh lower low vs 2009.  This it must do to complete the 1-5 down.  Therefore the market must go below 13,500 at least.

 

Zooming in further on the Weekly again (3rd chart) we can see a clear Wave 1-2 (pink) and I believe we are in a Wave 4 (blue) of Wave 3 (pink) with a final move down to complete this move due, which should run quite hard down.  After that a strong retrace followed by a final drop to the bottom, wherever that may be.

 

Indicators support

There is Neg Mom Div right now on the Weekly at the current high (likely wave 4 - blue) and no Pos Mom Div posted, which suggests this is yet to come (probably at Wave 3(pink)).  Same picture on the Daily with Stochastic and RSI at or near over bought (note I prefer Daily indicators to weekly, more reliable).  On the 4 hourly and hourly we also see Neg Mom Div at Wave 4 (blue) with both Stochastic and RSI coming out of over bought and heading down.

 

So in summary a Brexit Remain vote likely results in a relief rally, which will be short lived and could post a new Wave 4 high, and will then fall away to resume the big picture trend.  A Brexit Leave vote will leave the current working Wave 4 (blue) top in place and fall away fast.  Either way GBPUSD is going down.  I have a plan to get in Short under either scenario.  Next week will tell the tale I think.

 

Good luck to all and put safety first just now.

 



 



 

 

Link to comment

I posted the initially prior to Brexit with a bias that a remain vote would probably carry the day but that it would be close.  i though we would get a small rally to complete a Wave 4 and then get a resumption of the long term trend down.  In fact we did get that rally but before the vote and we did get the resumption of the drop after the Leave vote.  With the long term trend now in no doubt for me the result of Brexit means the GBP is free to find it's true level and the extent of the UK's trade deficit; the fact that Brown sold off most of the countries gold and inherent political uncertainty plus additional actions by the BoE (ZIRP anyone?) means GBP will fall further and faster than I had previously thought.

 

A new take on my long term charts (monthly and weekly) shows a different EW count off the July 2014 high, which fits much better and indicates a much longer way to go to bottom.  I have outlined in broad terms the likely map for the drop to parity.  I would expect to see Pos Mom Div at the eventual bottom, which we have not yet seen.

 

Jumping to the Hourly, I expect to see a retrace to at least the 50% Fib.  There is a chance that the retrace has already peaked and obviously a drop below the 13,225 low would signal that but given the likely volatility early next week I happy to sit and watch until a better Short entry presents itself.  Any Short is a keeper to gain the max pointage from the strong wave 3 fall.

 



 

 

 

 

Link to comment

Archived

This topic is now archived and is closed to further replies.

  • image.png

  • Posts

    • I was scrolling through the forums and stumbled upon your post about liquidity in the crypto world. Let me tell ya, you hit the nail on the head with that one. Liquidity is like the lifeblood of this whole decentralized finance thing, right? Without enough liquidity, transactions can feel like pulling teeth.
    • One of the unique advantages I get from my gaming enthusiasm is to be exposed to cutting edge innovations in the gaming sphere. This time, I came across Altered State Machine (ASM), a project that seems to be shaking up the industry with it's decentralized AI protocol. With ASM, you own a unique AI "brain" represented as an NFT, complete with its own strengths, weaknesses, and potential for growth. Wild🔥...    So in 2023 FIFA cut ties with football gaming giants EA Sports and I am now wondering if it had anything to do with the new partnership with ASM cos I can easily see how that played out. ASM has also partnered with iconic brands like Muhammad Ali and ABG, showcasing the potential of AI in the gaming industry.  But ASM isn't the only player in the AI gaming space. Competitors like Alethea AI and SingularityNET are also exploring the potential of AI in gaming making it an interesting horse race. However, ASM's focus on NFT ownership, interoperability, and big partnerships is giving it a unique edge at the moment.    From what I understood, ASTO is going to be the lifeblood that fuels the ASM ecosystem. It will power various aspects like gameplay, training fees, and even NFT sales. Owning ASTO gives you a stake in this dynamic ecosystem and it will be listing on Bitget with each users able to grab up to 1,250 ASTO. I have to say AI gaming is evolving rapidly, and ASM is a frontrunner. So, keep an eye on this space, guys - the future is intelligent, and it's gonna be exciting!
    • I think we should brace ourselves for the Ethereum ecosystem bull run as the much-hyped Dencun upgrade, initially slated for earlier, is now making its grand entrance in March 2024. Analysts are buzzing with excitement, foreseeing Ethereum (ETH) and its ecosystem projects stepping into the spotlight as the main actors of the next bullish surge. If all goes according to plan, this upgrade could unleash the full potential of the Ethereum ecosystem.   https://consensys.io/ethereum-upgrade   Just a month ago, the Total Value Locked (TVL) in most Ethereum Layer 2 (L2) protocols skyrocketed to all-time highs, with Optimism, Arbitrum, and Metis leading the charge. Following this surge came a wave of gaming projects flocking to the chain, banking on Ethereum to revolutionize gaming experiences and slash those pesky transaction fees.   The ETH price action is sending vibes reminiscent of Bitcoin’s pre-ETF era. As we eagerly await the potential approval of an ETH spot ETF in May, the “Decun” upgrade emerges as another game-changer. Analysts draw parallels between the impact of this upgrade on ETH and the transformative “Fire-Dancer” upgrade on SOL (Solana). In anticipation of these game-changing events, we’re witnessing a flurry of activity, with more L2 and gaming projects sprouting up on the Ethereum chain. OKX is already test-driving a promising L2 chain dubbed X1, while Bitget contemplates building a blockchain to amplify the utility of its Ethereum-based token, BGB. Not to be left behind, Binance has seamlessly integrated Optimism into its smart chain with opBNB.   In just one whirlwind month, a plethora of Ethereum-based projects have burst onto the scene, boasting impressive price actions upon listing—think STRK, MAVIA, NADA, ASTO, and the list goes on.   With ETH soaring above $3k and the charts painting a picture-perfect bull trend (even the likes of OP and ARB notching up multiple all-time highs), it’s time to ask: What are your expectations? Do you believe in the staying power of these new projects, or are they just fleeting sparks in the crypto cosmos? Strap in, folks, because the ride is just getting started!
×
×
  • Create New...
us