The Brexit vote is playing out in the market exactly like the Scottish referendum

Author: Adam Button | Category: News

Comparing the Scottish referendum vote GBP/USD chart to the current one

The reason they write playbooks is because history tends to repeat itself.

The Scotland vote took place Thursday, Sept 18, 2014:

The UK Brexit referendum takes place today: Thursday, June 23, 2016

What next?

Here's a five minute chart of the day of the Scottish referendum and the aftermath which I was able to dig up from a post Greg did on the day afterwards.

Here is how he described it:

After the first "NO" was announced, the first break above the 1.6461 level occurred and the high was made. All is good with the buyers. The bulls were in firmer control. The subsequent correction action (remember the big districts were yet to report) of the the initial high found buyers against the 1.6461 (good hold) and near the 50% of the last leg higher (yellow area in the chart). Buyers remained in control. Soon after a string of "No's" came out from bigger districts, the double top was made (see chart).

The peak was in by the time the final tally was revealed at about 0720 GMT.

A closer look

Another similarity was that polls in both referendums closed at 10 pm local time (6 pm ET). The first move took place after the polls closed an 'exit' polls were released. The first ones weren't actually exit polls but surveys taken the day before the referendum. Two similar polls will be released from Skye and YouGov after the Brexit voting close.

What should also be a market mover is a true Brexit exit poll that Livesquawk in conjunction with the Press Association will be releasing. We'll have the results.

Greg has helped me annotate that blurry chart with times (add 4 hours for GMT, 5 for London)

The final round of heavy 'sell the fact' selling show here hit at about 1100 GMT (7 am ET). However, the selling continued as New York arrived and GBP/USD fell another 83 pips from here and closed on the lows.

It then rallied on Monday and Tuesday as real money returned before starting 8 consecutive days of declines on Wednesday.

Now, that all took place in the midst of an extended softening of the pound as UK economic prospects deteriorated and the BOE back away from rate hikes. Cable is in more of a sideways trend, or even a slight uptrend at the moment.

What's the trade?

The times might not match up but look for a similar kind of topping formation and remember that there's no need to pick a top. Even missing the first move lower and everything to the break of the 200-hour moving average, there was still more than 150 pips of downside.

If the selling does come. Consider getting long very late in the day or at the open on Monday as real money buys back GBP.

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