How to sail through Brexit negotiations without being shipwrecked
Theresa May has done remarkably well recently. I highlighted some of her problems around 3 weeks ago here.Since then May has galvanised enough support with her party to plow forward with her EU negotiations kept Boris Johnson in order resisting his potential posturing for leadership and literally danced through one the of the worst timed Conservative partyconferences that you could imagine. However, with that being said, the Brexit negotiations are at a pivotal point. On the 17th and 18th of October there is an EU summit. This is now the near term focus for the market. Jean-Claude Juncker, the President of the European Commission has said over the weekend that he thinks a Brexit agreement could be reached in November, if not sooner. The market is optimistic
See this report on his comments over the weekend
The move over the last few trading days has been for growing confidence that a Brexit deal will be reached and that a cliff edge Brexit will be avoided. See Justin's reports here. So, that is the present mood of the market, but that can all change with one headline. The Irish border problem is still unsolved and although May has claimed that she has a new approach the solution is not going to be easy. So, the chances of May's new proposal being instantly accepted seem slim. This rejection or questions or problems over May's proposal would of course, result in the GBP falling. I flagged this concern I had here on Friday, so keep an ear out for headlines.
So, how to trade this. Well, firstly, don't let this wreck you. This scenario is a recipe for volatility and large price swings. So, if you want to bank on a GBP recovery make sure that you use very large stops and probably negative leverage. e.g use less than no-leverage. However, I don't think that is the best way to play this. Instead try to enter positions at key technical places e.g. use the 50, 100 and 200 moving averages to define and limit your risk across the larger timeframe charts; 1hr, 4hr, and daily. Take profits as they present and keep some of your position on in case the issue is resolved one way or the other to catch a potential spike. There is a distinct possibility that a deal will be reached over the EU summit in 10 days time. So, start to recognise the moment while keeping risk to an absolute minimum. In this way, you won't be caught out by a complete breakdown in negotiations which, of course, could easily happen.
