Are we staying or leaving? It doesn’t matter because as a trader, We will make money whatever happens. And you can too.
Let’s take a look at some price movement leading up to the UK’s referendum on membership of the European Union on the 23rd of June. In particular, let’s focus on the impact the vote will have on the GBP/USD. Are we staying or leaving? It doesn’t matter because as a trader, We will make money whatever happens. And you can too.
Below is our monthly chart dating back to 2002. We have highlighted the key support areas where the GBP has moved to during the last 14 years. Our support lines come at 1.4000 which is hugely important. The chart shows that despite 14 years of market cycles, the GBP/USD hasn’t fallen significantly below this level (A), (B), (C)!
Why is this interesting to us? Because price found support at this level (C) even during the 2008 banking crisis and housing bubble! Can you see our Algo picking up a short set up in 2008? We’ll save that topic for another day..
Now, in 2016, price is at this level again (D).
This tells us that this 1.400 level is extremely robust support. The question is: if this level can withstand previous economic shocks, will it endure the economic shock of Brexit? Well, think of it this way: support and resistance is key to defining supply and demand. In other words is the value of the GBP/USD too cheap or too expensive? Is it a coincidence that price has once again gravitated to this level before a major economic event? We talk more about the professional use of Support and Resistance in our video blogs.
Let’s go deeper into our daily charts. To the trained eye, 1.4700 is a clear line of market resistance. We can see price action in the last few months since February oscillating between 1.4000
(14-year-old) support level and 1.4700 resistance level. Traders are uncertain on the outcome of the vote but we still have a trading plan to profit either way. Look at our plan below and see our targets – both up and down.
Under the magnifying glass, the last couple of days indicate to a technical trader that this referendum is likely to have a ‘remain’ result. Despite all the news and recent polls in the past few days, price still hasn’t broken our 1.47000 resistance level, which again is very interesting.
What can we conclude from these two charts? On a monthly basis we can see a very strong support level holding since 2002. Our daily charts are showing a ranging market from February 2016. If we stay in the EU, prices will surge above and beyond 1.5000-1.5200. If not, prices could dramatically fall. So how on earth can you trade this?
If you’re a new trader it can be daunting entering the market in such volatile conditions but where there is risk, there is profit and with a little help from a trading system, you can turn Brexit to profitable advantage. Subscribe to our webinars and learn how we will personally trade the Brexit vote.