In 2016, most of the surveys about the Brexit Referendum were signaling that people will say no to Brexit but just by a small margin. GBPUSD was weary but priced in the survey results last week before the referendum by an increase of %7.17. Traders are overoptimistic despite the surveys were really close. But this optimism did not last long. After the referendum GBPUSD fell %11.91 just in one day and %14.78 in two weeks. Eventually after 2 months of up and downs GBPUSD touched the lowest point with -%21.15 from the top.
This time, there is no referendum or any surveys. Brexit negotiations are ongoing for months with no significant advance. The main problem is fishing and it is so small compared to the general deal, investors can’t believe a no-deal Brexit can happen, at least when you look at GBPUSD. The price was on an upward trend throughout this year with the help of the weak dollar and it increased its trajectory last week and testing long-time resistance 1.35.
But the optimism in GBPUSD can be deceiving because investors learned their lesson in 2016 and now hedging themselves in options markets by positioning against GBPUSD. But how much of a fall can be seen if no-deal becomes certain?
First of all, near 1.30 level trends will likely to fail and with more stops started to activate 1.25 can be a good first target, near %8 from the top. An interesting thing will happen if the price won’t stop at 1.25. From the top of last week, the 1.20 level is down %11.92, exactly the same as the one-day fell of the 2016 referendum.