Sterling Shining into Brexit Vote

• Posted by Greg Harmon
• on May 27th, 2016

All eyes in the US are focused on Janet Yellen and the FOMC meeting in two weeks. It is an important event for the whole world for sure. But across the pond they are also looking beyond this to the vote on whether the UK will leave the European Union. Brexit as it is known.

I have not paid much attention to what is going on in the UK at the ground level since 1999 when I was asked to move from London back to Boston, but it seems silly on the headline level that the UK could ever not be part of Europe. Not my decision to make and I certainly do not know all the debate. What I do know is that the British Pound which had been falling the entire back half of 2015, is strengthening into the vote.

Since making a low at the end of February against the Dollar, Sterling has been plodding higher. There have been a series of higher highs and higher lows. The end of April marked the first major milestone, breaking above the February bounce level. The action is forming an ascending triangle. The break of the triangle would target an 8 handle move. That is large.

Will it break to the upside, back to the range before all this talk of Brexit? Or is this just a bearish consolidation in the move lower? I vote for the former. The momentum indicators are what swings the vote for me. The RSI is in the bullish zone and rising with the MACD rising and in positive territory. That does not mean the triangle will break anytime soon. There are certainly two catalysts in the next 3 weeks and it could wait for both to clear the range. Which way do you cast your vote?

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