While the pound sterling has certainly had its fair share of problems over the past year, some analysts now seem to think that the time has come to load up on this beaten-down currency and buy the pound. It has been argued by these people that the whole Brexit process with the UK leaving the European Union may in fact become an even bigger problem for the EU than it already is for the UK.
If this is true, wouldn’t it make sense that it’s the euro that has the most difficult time ahead of it, and not the pound?
We asked two leading forex market experts for their opinion on whether traders should bet on the euro or the pound during this last month of 2018.
As Brexit approaches, trade the latest news with Exness!
Buy the euro!
Looking at the weekly chart of EUR-GBP reveals that there has indeed been a tight range of price for nearly all of 2018. What this usually means is that, sooner or later, price is going to break out of that range in a very strong way. The question is... which way?
With the Brexit situation being as difficult as it is for British Prime Minister Theresa May, betting on the pound now seems foolish. There’s still a chance that she will not be able to push through her controversial Brexit deal in her own parliament, which would throw the UK into a very difficult ‘no-deal’ type of situation before the country’s exit from the EU.
A ‘no-deal’ scenario would probably be the final push needed to send the pound falling off the cliff. As a result, the euro would most likely surge on increased confidence that all countries are better off by staying in the EU.
No, short the euro, buy the pound!
The euro will clearly not benefit from having one of the most powerful countries in Europe leave the EU. In fact, the exact opposite is much more likely to happen! As a major financial center and an important economy, the UK will be just fine on its own. The EU, on the other hand, is in for some big trouble of its own.
The EUR-GBP chart below also supports this view, clearly showing that the current levels are actually rather high for the euro. Judging from technical analysis, the euro could easily drop to the red support level formed by the bottom in late May 2016.
And when it comes to the real fundamental drivers here, some argue that the UK leaving the EU is just the beginning of a trend of more and more countries following in its footsteps. Who knows which country will be next? Could it be Italy, the Netherlands, or even France? Just having this uncertainty hanging over it will be enough to weaken the euro significantly over the next few months.
The takeaway: Brexit uncertainty
So, what should you do? Do you choose the euro or buy the pound in the last month of 2018? Once again, even the experts disagree, and there are certainly good arguments on both sides here. What is sure is that the uncertainty surrounding Brexit is really something that will be felt in the forex market as we go into 2019.
Regardless of which side of the argument you agree with, it’s worth treading carefully and perhaps remaining flexible. Strong volatility is likely this month for EUR-GBP, so trading both ways depending on the latest news is a strategy favored by many traders of this pair.
Now’s the time to start trading the Brexit-hit EUR-GBP!
Your 4-step guide to opening a trading account
Step 1: Getting registered
It's very easy to open an account with Exness. Click here to open the sign-up page in a new tab. If you want to get everything done in the next 10 minutes, be sure to have a credit card, ID, and, proof of address by your side. You can choose to open a demo account without these things. Either way, everything you need to know is here in this two-minute video. Pause the movie as you go through the first three steps.
Tip: Account type depends on the amount you wish to deposit. Leverage is effectively an interest-free loan that the broker offers. It allows you to make a large investment from a small deposit. If you are looking for high profit with high risk, a higher leverage might be right for you. If you prefer slow-burning safety with lower results, then keep your leverage low. You can never lose more than you have, but higher leverage means faster results... both good and bad.
Step 2: Prove who you are
Exness takes security very seriously, and they check every client signing up. Just like opening a bank account, you'll need to prove who you are before getting access to the global markets. Watch this one-minute video to see how.
Tip: While you're waiting for your real account to be approved, open up a demo account and start getting to know the trading platform.
Step 3: how to get access to the market
Trades are made using the award-winning MT4 trading platform. Inside the box of the demo or real account you'll see a gear cog. Click the gear cog to make a deposit. Use the passwords provided in the email. Click the gear cog again and select SIGN IN TO MT4 WEBTERMINAL then follow this one-minute video. You're about to make your first virtual trade on the real markets.
Step 4: making a trade
As a default, the top currency pair on the list will have an open chart. Right click on the chart and select the “close” option.
As a professional trader, selecting the right pair requires some research. For a first-time test, any pair will be sufficient. Drag a pair from the list of currencies on the left side of the trading terminal. The old saying goes, “what goes up, must come down.” Obviously, this principle goes the other way too. Your mission is to find a moment when the price direction is going to swing or reverse. If you feel the price is about to go up (bullish), then BUY, if it looks like it’s been trading high and the price has started a downward (bearish) trend, then SELL.
There are many ways to open your trade. You can select from the buy and sell options on the top left of the chart. Preferably, double-click the currency pair on the list. Right click on the chart when you’re ready to make your first trade. Time to set the volume depending on how confident you are in the direction you are forecasting. This is the perfect time to set your stop loss and take profit. Click the arrow to the right of the stop loss and take profit prices.
Note how the blue and dark red lines in the popup graph sit above and below the buy(ask) and sell(bid) price. In the example, we traded long (buy) and got a message confirming the order was successful. If you get an error, your volume was too high for your balance, or your stop loss/take profit was too close to the spread. Remember, every order starts as a negative because of the spread. Be patient. Your take profit will activate when the time is right, and your stop loss is protecting you. To close an order, you have three options. Click the X on the right or right-click the order. If you double click the order, you can close or modify the order.
Congratulations! You now know how to make a trade. Forex trading can be an exciting way to spend your free time, and you'll actually learn some real-world skills that will serve you well throughout your lifetime. Be patient, learn, and who knows, you might one day be one of the lucky few full-time traders. How will you spend your day?
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