GBPJPY continues to consolidate this Monday as the European Council President Donald Tusk has confirmed a Brexit extension until 31 January 2020.
Tweeting via his verified Twitter handle, Tusk said:
“The EU27 has agreed that it will accept the UK’s request for a #Brexit extension until 31 January 2020. The decision is expected to be formalized through a written procedure.”
Last week, markets had priced in the possibility of a Brexit extension following events in the UK Parliament. This is why several GBP pairs (including GBPJPY) have not had a remarkable response to the Brexit postponement announcement.
However, the UK PM’s Spokesman has responded to the announcement by Tusk. The spokesman was picked up by the newswires a few minutes ago as saying that the PM’s view on an October 31 Brexit had not changed.
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Technical Outlook for GBPJPY
Due to the full anticipation of the market to this announcement, the GBPJPY is trading range-bound and has been confined to the range formed by the central pivot at 139.415 acting as the floor, and 139.802 (R1 pivot) acting as the intraday ceiling.
The primary focus for GBP traders is the UK election vote, scheduled to hold today at in the UK Parliament. UK PM Boris Johnson wants to push for a snap election. But why does the UK PM want an election?
His spokesman captured the thinking of his principal aptly in his response given a few minutes ago:
“Parliament has been blocking Brexit for three years, it’s clear we need a new parliament.”
There is a general consensus among the Tory Party politicians that the parliament is stalling on the process. A new election will give them a chance to win a parliamentary majority, which unseats the anti-Brexit parliamentarians from the Labour Party and gives PM Johnson a clear pathway to Brexit.
The vote holds today at 5pm GMT to decide if an election should hold on December 12 as proposed by the PM. A two-thirds parliamentary majority passes the election vote, but needs at least half of the MPs from the Labour Party to scale through. This is a tough ask as majority of Labour MPs will not support an election until all no-deal Brexit scenarios are “off the table”.
However, Johnson could get support from the Liberal Democrats and the Scottish National Party (SNP). In this case, a simple majority without the support of the Labour Party will trigger the December vote. Passage could be positive for the GBPJPY and push it beyond the range ceiling and towards 140.18 (R2 pivot) and 140.57 (R3 pivot), in that order.
A defeat of the election motion could be seen as negative for the GBPJPY and could see the range floor give way to 139.02 (S1 pivot) or the 17 October low of 138.64 (S2 pivot) if downside momentum is strong.Download our latest quarterly market outlook for our longer-term trade ideas.
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