Bet carefully on no-deal Brexit outcome because it isn't that easy
Boris Johnson is widely expected to become the next Prime Minister of the United Kingdom and his appointment comes with a resignation of a few minister who do not support his agenda. Boris wants to leave the UK on the 31 October with or without deal and his view isn’t supported by the members of his party such as the Chancellor of the Exchequer, Philip Hammond.
Since 2016, Sterling has been under tremendous pressure and mainly due to the lunatic behaviour of British politicians. They have made the British political system look like a circus. The threats which May faced with respect to her positions are going to be the same for Boris as well. Alan Duncan, a person who is not afraid to speak about his former boss, floated an idea in the House of Commons: if Boris actually deserved to be the Prime Minister and has the support of the parliament? But this was blocked by the speaker of the House of Commons John Bercow.
The fact is that Conservatives do not hold majority in the parliament and getting the support of the law makers isn’t going to be a walk in park at all. The threat of another election is going to remain as strong as before. Nonetheless, with the appointment of Boris, we expect Sterling to continue to move lower as it only increases the risk of no-deal Brexit. However, do not expect any sharp downward moves in Sterling because of the recent Iranian situation. Remember, the incident only happened because the UK was kicked out of the European Satellite operation and this really signifies the importance of Brexit and no Brexit which Boris isn't going to ignore.
The Trade
On the daily time frame, sterling-dollar looks really weak, bears are in strong control. The price is trading below the 50-day moving average and as long as this remains the case, bulls do not have any hopes. The downward trend shows that every upward move was an opportunity to short the market. The near term support for Sterling is at 1.2360 followed by the next level at 1.2037 (March 2017 low). Any upside moves are capped by the resistance of 1.2629 (this is where the 50-day moving average is) followed by 1.28.
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