It’s been 875 days since the EU referendum vote, 596 days since the UK triggered article 50 and there are 134 days left before the UK formally withdraws from the European Union. Recent negotiations suggested an orderly departure for the UK had been agreed, but today was anything but orderly. It was already billed as a tough day for the PM, facing the commons for the first time since the agreed legal text become widely available but it didn’t get off to a great start, a tweet from Brexit Secretary Dominic Raab at 8:53 AM announcing his resignation from the post. The pound went into freefall, dropping more than 1.5% in the morning session and tracking lows throughout the day. The former Brexit secretary- the second person to quit the post – was swiftly followed by Work and Pensions Secretary Esther McVey, another high profile cabinet member who stated the deal put forward does not honour the result of the referendum. An ever defiant Theresa May presented her case to parliament, but she was faced with intense criticism from all sides with Labour leader Jeremy Corbyn describing the deal as ‘botched’ and potentially leaving the UK in a ‘halfway-house’ with no voice.

The prime minister has vowed to push on, declaring her deal is the only one on the table and the only other options being a no deal or no Brexit.  She now faces the real possibility of a no-confidence vote, a process which requires 15% of elected conservative MPs to submit letters to the “1922 Committee”. Currently, there are 315 conservative MPs, 48 letters would be required to a trigger a vote.  A number of high profile MPs have posted their letters on Twitter, it is thought that currently there are not enough letters to trigger a no-confidence vote but its early days with rumours of further resignations it’s likely the letters will increase. Overcoming this challenge will be the next key focus before the EU meets at an emergency meeting on November 25 where the European Council will formally discuss the draft agreement. A ‘super-majority’ will be required in order to sign off the deal, this will put the ball firmly in the UK’s court and the UK government will have their ‘meaningful vote’ in what will be the PM’s biggest hurdle. A vote in favour of the deal and there will be light at the end of the tunnel, rejection of the deal and the Brexit show continues.

Today has not been a good day for sterling, off over 200 pips from yesterday and dangerously close to the double bottom from the August and October lows. We are in a zone between 1.2789/1.2577 which offered the first support when the pound dropped after the EU referendum back in June 2016, it acted as resistance up until April 2017 and has acted as support going forward. We have had a number of tests since with the latest move down again testing this area. Moves further south through the zone then we fall into dangerous territory, leaving us with the possibility of moving towards lows set after the 7th Oct 2016 drop, which saw lows not posted in over a decade. 1.2151/2088 is a zone which has seen support, it was briefly overcome in Jan 2017 but regained control and found solid support when tested again in March 2017.

GBPUSD – DAILY CHART –Sterling plummets and looking to test yearly lows

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Source:ETX Capital