The next two to three months will be critical for the future of the U.K. economy, Ben Broadbent, deputy governor of the Bank of England said on Monday.
The U.K. government is racing against the clock trying to clinch a deal with the European Union in the coming weeks. The idea is to have an agreement on how the U.K. will leave the EU in March of next year with enough time for parliamentary approval both in the U.K. and across Europe.
The BOE said the U.K. is set to grow 1.7 percent in 2019 and inflation is likely to hit 2.1 percent during the same period. The central bank's forecasts are based on an assumption that the U.K. will strike a deal with the EU and keep relatively close trade links with the bloc, although this outlook can change materially if a deal is not found.
Following the November meeting, the BOE warned that despite good economic data, the lack of certainty over Brexit seemed to have hit business sentiment and could bring further volatility.
The uncertainty has drastically affected the currency market with the cable currency (GBPUSD) declining by 15% since the referendum and 10% since April (latest high).
Volatility in this currency will continue until we have clarity but in the mean time this creates a lot of opportunities for the trader.
As we can see from the chart, our sentiment index shows that 60% of the trades are positioned long whilst 40% think that the pair will drop even more. Personally, I am with the 40%. Both Stockhastic and MACD are also showing a bearish trend.
I expect the price to drop close to the support line (yellow 1.265) which has acted very nicely already in October and August and also acted as a resistance early last year.
Once this happens, it will then be a golden opportunity to enter long.
What do you think? Let us know in the comments box below!
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