Months of campaigning, for and against, the EU membership the nearly 6-months of market uncertainty draws to a close as the UK referendum vote gets underway. Polling stations are expected to be open from 0700 UK time and will close at 2200 UK time June 23rd.
British, Irish and Commonwealth citizens, aged 18 and above and those who are residents in the UK or Gibraltar will be eligible to participate in the referendum vote. The registration for the polls closed on June 9th. A record 46.5 million people have signed up to vote in the EU referendum which is incidentally the highest voter registration in British history.
No member state has ever withdrawn from the EU in its current form, and no member state has ever held a national referendum on withdrawal from the EU. In 1975, the UK held a national referendum on withdrawal from the European Economic Community (EEC), the predecessor to the EU in its current form. Back then, 67.20% of voters choose to remain in the EEC.
Voters will be asked the question:
‘Should the United Kingdom remain a member of the European Union or leave the European Union’
Voters have to answer by putting a cross on the box next to one of the two answers:
- Remain a member of the European Union
- Leave the European Union
Once the polls close at 10 PM, counting starts at 382 local counting centers. There are no exit polls being released which is likely to keep the uncertainty going on any rumors or news flows that will hit the wires.
The first counting center’s results will be available from 0100 UK time on June 24, while the complete counting of the polls will be completed and available from 0200 – 0430 UK time, with the official results being announced at 0900 UK time, June 24th.
If the voters back a Brexit or a decision to leave the EU, British Prime Minister, David Cameron will invoke Article 50 of the EU Treaty also known as the Lisbon treaty, which says “Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.”
In the event of a Brexit, the UK will still remain a part of the EU, until the legal requirements are complete. However, the markets are most likely to remain very volatile, with a lot of questions still unanswered. Under Article 50, the member state should notify the European Council of its intention to leave the European Union. What follows next is a withdrawal agreement that is to be negotiated between the EU and the state. It is from the date of this agreement that the treaties of the European Union will cease to be applicable, or within two years of the initial notification if no agreement is reached.
The Euro and the Pound Sterling will no doubt be affected the most with gold and yen likely to see volatility as a result of their safe haven status. The US dollar in this aspect is also expected to remain a preferred safe haven currency.
GBPUSD – Technical Outlook
Technical Scenario 1: Inverse Head and shoulders, Bullish
The weekly chart for GBPUSD shows the inverse head and shoulders pattern that has been forming since January 2016. The neckline resistance is seen at 1.477 – 1.4668. A breakout above this neckline resistance will see GBPUSD rally towards 1.505 (rounded off) initial target followed by 1.545 (rounded off) second target. The inverse head and shoulders pattern will be invalidated if GBPUSD falls below the right shoulder’s low at 1.401
Technical Scenario 2: Head and shoulders pattern, Bearish (long term)
A zoomed out view of the GBPUSD on the weekly time frame shows the decades-old head and shoulders pattern being formed. The neckline support is identified at 1.432 – 1.383. A break of the neckline support here could see GBPUSD fall to lows nearing parity. However, the price action near the right shoulder has been currently moving into a descending wedge pattern which could signal an upside bias.
A break above $1.53 will no doubt see near-term strength in the sterling which could eventually see prices move to $1.545, based off the previous view.