Brexit Uncertainty Continues To Put Pressure On The Pound Sterling

The Brexit saga continues to unfold as Prime Minister Theresa May postponed Brexit deal vote in U.K Parliament last week. The cancellation happened after it becomes clear that May will lose the vote by a large margin if she forces it through the Commons. Subsequently, Ms. May survived a confidence vote in her own party and tried to renegotiate the Irish backstop issue. However, the European Union summit leaves her empty-handed,

Under the backstop, the UK will stay in customs union with the EU. Northern Ireland will maintain alignment with EU's single-market rules. Mrs. May requests a 1-year time-table for the backstop, but the EU did not grant her that request. The EU leaders clarified that they don't intend to use the backstop and it will be only temporary. Even worse, EU leaders removed two important references in the Brexit draft. The first reference removed is that the backstop is not being desired and the second is they are ready to offer assistance to Mrs. May to ratify the deal in Parliament.

Time is running short as the Brexit is due on March 29th. The ultimate deadline for the vote is January 21st. The news of the delay caused the pound to tumble to its lowest level in 18 months. The European Commission will publish a plan to cope a no-deal Brexit this week. Even as both sides want to avoid this outcome, the possibility of a no-deal Brexit continues to linger and put pressure on Pound Sterling in the near term.

Pound Sterling Crosses Elliott Wave Analysis

(Click on image to enlarge)

Brexit uncertainty should continue to pressure Poundsterling lower

Elliott Wave Analysis on GBPCHF above suggests that pair has a bearish sequence (lower low sequence) from 4.18.2018 high, favoring further downside. The decline from 4.18.2018 high is unfolding as a double three Elliott Wave structure where wave ((W)) ended at 1.2459 and wave ((X)) ended at 1.3116 on 10.10.2018. The pair has since broken below wave ((W)) at 1.2459, suggesting wave ((Y)) lower has started. Near-term, while bounces stay below 1.3184, expect the pair to extend lower.

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