Pound loses some ground as short Brexit extension seen as next likely path

Technical Analysis

Author: Justin Low | gbpusd

Cable price action still caught in the middle though

GBP/USD H1 20-03
The Brexit rumour mill is back in full spin once again as now it seems that a short Brexit extension appears to be the next likely path that this whole saga will take. There's even talk now that MV3 may not even take place next week unless May can be sure of the votes, with the possibility of it maybe taking place during the extension period.

It's all a big fat mess right now as any short extension to Article 50 is going to serve as an uncertain period of decision-making for Brexit, but on steroids. Whatever mess that wasn't sorted out over the last three years will now come down to both sides finding a compromise over the next three months.

Otherwise, the UK would have to either decide on extending Brexit until 2020 (with valid reasoning, which may require indicative votes) or face the risk of a no-deal Brexit at the end of June. It's pretty much just kicking the can down the road again but this time possibly being the last one, logically speaking.

The pound is a little softer to start the day with cable falling to a low of 1.3226 moments ago as price action continues to be contained between 1.3200 to 1.3300 since last week. With no firm decision set to be made on any significant Brexit decisions in the coming days, I would expect more choppy price action to prevail once again between these levels.

For today, the bigger risk factor will be the FOMC meeting later so just take note of that. As for Brexit developments, a short extension is almost certainly going to happen and the can will be kicked down the road for another three months.

The risk here is that if certain EU member states will feel dissatisfied with such a decision without any real reason being given by the UK; since MV3 isn't even looking like it will take place. If any of them decides to throw a wrench into the works, that's when we could see some real fireworks in the pound.

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