Saturday, July 09, 2016

British Pound: Sterling Needs A Saviour And Mark Carney Be Thy Name

For someone who's student debt is all in Canadian Dollars (woo hoo!) but is being paid in British Pounds (boooo!) the last two weeks are something I'd like to forget. We had such a beautiful declining bullish wedge developing in Sterling that just I know would have smashed resistance and broken upwards had the Brexit vote been in the other direction. Alas, this optimistic and fanciful dream has not come to pass and the nightmare I thought we were voting against has now arrived. We have a British pound that has fallen and won't stop. We have a political establishment in absolute chaos (I wish this was hyperbole but it isn't I'm afraid). Neither side of the Brexit vote had a contingency plan for this eventuality and no one seems to be prepared to accept responsibility for the outcome that has been wrought on this country. Even if a Tory leader is "voted" in by September the country is rudderless until then, and until then she will be untested and unprepared for the challenge that lays ahead. Never before will a British Prime Minister be inducted into the highest office in the land with such a baptism of fire. Because the Brexit vote has violently changed in the blink of an eye the political landscape of this country the next Tory leader can only expected to be 'care taker' for the next twelve months after-which another election will have to be called. This was supposed to be a three generation Tory dynasty after Tony Blair and Labour's illegal invasion of Iraq, but David Cameron's actions have me now questioning whether the Tory's can even last until the end of the year.

Looking at the very long-term chart of the British Pound it appears a massive head shoulders pattern may have been developing all along. The neck line is broken and there is nothing below. We are truly in uncharted waters.
Looking at the weekly chart, if a large downward channel has formed ('if' being the operative word) support might come around 120 on FXB, the British Pound ETF.
Turning to the daily charts it's also possible a steep declining bullish wedge is developing, although I'm not completely married to this pattern. The only hope of this snapping up is Mark Carney's announcement of a stimulus early in the new week and not a moment too soon because some sort of bottom needs to appear to be going in at this stage.