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  • EUR/GBP: techncial bias is bearish.
  • EUR/GBP failed through trendline resistance.
  • Brexit is a spaghetti junction of a mess and until straightened out, it is anyone’s guess and impossible to trade responsibly.  

Prime Minister Theresa May lost control of Brexit on Monday, when Parliament voted (329 versus 302) to grant itself time for indicative votes on alternative paths and solutions to a hard Brexit which includes a probable second referendum – while a hard Brexit still remains an option, it is now highly unlikely considering the majority of MPS are in the “remain” camp – In fact, the worst that could happen is a soft Brexit – (yet, the pound remains under water while below 1.3620 although has built up towards that key level vs the greenback since the start of the year).  

So where from here? Brexit day has been postponed until 12 April – but as of today, parliamentary will debate and vote on the statutory instrument (SI) changing the date of Brexit in the EU Withdrawal Act  – (The SI is required because otherwise large chunks UK law will detach from the EU on Friday night, while the UK remains a member, creating potentially all manner of legal confusion). The vote will take place in the Commons tomorrow, probably at around 7 pm – There will also be a vote in the Lords before the end of the week – this s first and foremost. However, there four options left on the table will also be widely debated and discussed, as a driving force for price action in sterling, depending on the headlines and sentiment for each of the following four options:  

a) No deal (Brexit);
b) May’s WA & PD (Brexit);
c) ‘Closer relationship’ revised WA & PD (Norway+, CM2.0,etc) (Brexit);
d) Revoke A50 (no Brexit).

Individually, no option appears to gather a majority in Commons and that is where the theory of a second vote can be applied. It would potentially be processed by elimination – i.e, if there is no majority for one option where otherwise the process ends, the least voted for are eliminated and then the final two are taken for a second vote – If there are no substantial majorities – a second referendum would likely be called.  

What does all this mean for EUR/GB?

At this juncture, the pound is likely to draw some support form the fact that a hard Brexit is now highly unlikely again. There are signs that the eurozone is slowing, that the ECB is putting on the breaks with respect to tighter policy and this the euro can feel the pinch of investor sentiment bearish on the global economy, weighing on risk and indeed the euro. So long as Brexit remains a spaghetti junction of options and a hard Brexit remains somewhere on the table, there is likely to be a lack of significant bias one way or the other for the cross, but as the spaghetti-mess is straightened out over time, there will be more of a bias either in favour of the pound or not and a more defined trend to run with, (rather than leaving one’s finger in the air and running the risk of burnt fingers).

EUR/GBP levels

From a techncial perspective, however, that rejection from the 10th Oct lows at 0.8722 sent the cross back below the prior trend line resistance opening back up the 0.8471 recent low which guards the 200-week ma at 0.8397. On the flipside, bulls can target 0.8842 (200-day ma) – The bias on the charts is down.