Euro zone thinks that by punishing UK by blocking business access and by devising other devious plans it will set an example. What a regretful thinking. We believe that any such steps will only increase the animosity and set off domino effects and eventually hurt both of them. But here Euro zone has more to lose. This period looks like the start of a silent cancer spread. Euro will only realize when it's too late. In short, Euro notes will end up in museum for future generations while Pound will survive. But right now we are not going to talk about ERU/GBP, which will be a great short in future. Instead we are focusing on GBP/USD which is the victim of crossfire.
What an irony that the week they introduced plastic notes, GBP/USD exhibited its less resilient side. Currently market is trading on the fear side of the equation. Fear of what if UK gets less favorable deals from Euro . We are not going to venture upon what politicians will decide because these wretched creatures have the ability to do the worst when the best is needed.
No matter what UK gets from Euro , GBP/USD is a great bargain near 1.2500. Fed can help us get that deal if they hike tomorrow. Besides low liquidity and tomorrow's high voltage Fed event has left the GBP/USD friendless at this moment. Bravest of souls won't venture to step in at this point.
At the beginning of the month we rode the wave higher from 1.30 to 1.34 and got long pound again on last Friday at 1.30. Albeit the trade gave use good pips with bounce on Monday, in profit trailing stop-loss got hit and now we are back to square, watching and waiting for next clue after FOMC.
We don't know where the Pound will settle after a year or in a decade. Who knows, maybe 1.60 or just 0.60 ! But only thing which is more probable in near future is that every 500 / 700 pip drop near 1.2500 will be supported and can turn out to be a good trade. So the trade remains simple, buy the big dip !