Intraday Market Thoughts

Britain Breaks Brexit Law

by Adam Button
Sep 8, 2020 14:57

Cable fell for the 5th day on Tuesday (-4% from last week's high) as PM Boris Johnson basically said he will break international law by rewriting the Brexit deal agreed upon with the European Union last year. GBP's selloff was worsened by the resignation of Jonathan Jones, UK's top government lawyer for the past six years. Indices are taking a fresh dive lower in a classic riskoff, where JPY was the strongest and USD was just below it. GBPUSD 1-month volatility hit 3-mth highs, with weekly chart eyeing 15.0.  NASDAQ and Tesla are down 10% and 30% from their highs respectively, while DOW30 and SPX are down 7%. The yen is the highest performer of the day, followed by the dollar CFTC commitments of traders numbers continue to show strong bets against the US dollar. Below is Ashraf's GBPUSD and EURGBP calls to members of the VIP WhatsApp Broadcast Group issued on Monday 11:06 am London time. A new Premium trade was issued earlier today.

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Britain Breaks Brexit Law - Whatsapp Gbp Sep 8 2020 (Chart 1)

Cable fell more than 100 pips Monday after Johnson set an Oct 15 deadline for the framework of a deal. So far progress on the stick parts of an agreement has been almost nil.

Even worse, the EU warned Johnson against reneging on parts of the withdrawal agreement after his government drew up new rules that could violate pledges on Northern Ireland. The UK PM said he is willing to walk away rather than compromise on core Brexit principles.

For now the market is showing some concern but we've been through the threats so many times before. Brinksmanship is part of the game and all of the tabloid-driven fearmongering has hardly bruised the economy over the past three years.

The makes it more of a question of when to buy a dip, not when to sell a rally. Near term eyes will be on 1.30 followed by 1.28.

The US and Canada are back from holiday on Tuesday but the economic calendar is empty.

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR +197K vs +212K prior GBP +6K vs +5K prior JPY +30K vs +24K prior CHF +12K vs +12K prior CAD -27K vs -29K prior AUD 0K vs -4K prior NZD +7K vs +4K prior

There is a large concentrated bet in EUR/USD but little else on the speculative front. Note that every currency is in a net long position versus the US dollar, except CAD and AUD.


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