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By: Ahura Chalki
Finally, divorce came to reality, at least on paper. December 31 is the official date when the UK has to start its new relationship, not just with the EU, with the rest of the world as well. Leaving the EU will come with canceling all international trade deals, which the UK had with other economies, as part of the European Union.
By next week, 18-19 June, UK must decide whether will extend the transfer period with the EU after December 31, to get to the point, or, with or without any deal, will leave the Euro.
There are three scenarios, first, which is many believe it’s more likely is that in last minutes, Johnson, despite serious claims on leaving, even with no agreement, will ask for an extension at least for one period of three months, and he has a good reason to sell his retreat, mentioning that COVID-19 tensions, interrupted the negotiation process. The extension will add another uncertain period, and it is not what financial markets are looking for.
The second scenario is a divorce full paperwork. The deal, what Johnson promised to do, a year ago. Regardless of the details of the contract, since markets at least are aware of what happened and rules are clear, it will boost the UK stock markets.
And finally, leaving with no deal will put the economy of the UK under pressure, because British companies must comply with the rules of the World Trade Organization, which is not the favor of London financial markets.
Among the possibilities on the desk, only a Brexit with a clear deal can help the UK100, at the moment, which in any case, have to wait until at least October or even November, when in case of not extending, by that time, the agreement must be done and submit to parliaments, in both sides for approval, very challenging year for Johnson and investors in one of the biggest financial center of the globe!
Technical overview – Weekly Chart
After free fall of February and March, seen in major stocks and indices, the asset could recover above 50% of its Fibonacci level, at 6,529, almost 500 points less than 61.8% of Fibo, however, could not hold the position and in return, trading at 6,100, under 50% of fibo. Technically bulls need to trade stable above 61.8% of Fibo and 100 weekly MA, more likely above 6,600 – 6,700. After that, second resistance in the weekly chart, sitting on 7,000 – 7,100. In flip side, 5,900, 38.2% of Fibonacci levels are the first support, and as long as its trading above this level, bulls have control of the market. CCI above 100, growing market volume and price above the trend line, all supporting the bullish trend.
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