The USD was supported against its major counterparts by expectations of further monetary tightening by the Fed. The greenback also gained due to the interest rate differentials of the Fed with other central banks, according to analysts. After the midterms, analysts also point out that, the next upcoming issues could be Brexit and the Italian Budget. We could see the US Dollar making gains also in its role as a safe haven, as the Chinese economy seems to slow down and the US-Sino trade frictions continue to affect the market.
EUR/USD dropped breaking the 1.1345 (R1) support level, now turned to resistance. We see the case for the pair to continue to trade in a bearish market today should the USD continue to strengthen. If the bears continue to dictate the pair’s direction, we could see the pair breaking the 1.1305 (S1) support line and aim for the 1.1250 (S2) support barrier. Should the bulls take over, we could see the pair breaking the 1.1345(R1) resistance line and aim for the 1.1385(R2) resistance hurdle.
Weak pound due to Brexit uncertainty
The pound weakened against a number of other currencies on Friday and opened with a negative gap on Monday against the USD. Main reason for the weakness seems to be a continuous Brexit uncertainty, as attention seems to be shifting towards the inner UK political scene. While the EU and the UK have yet to announce a deal about the Irish border issue, the two sides seem to be near an agreement about Brexit. On the other hand, the risk factor on this issue, seems to be whether UK’s PM will be able to pass any deal agreed with the EU, through UK’s parliament. As uncertainty rises for Brexit, volatility for GBP pairs seems to rise with it.
Cable dropped further on Friday, clearly breaking the 1.3015 (R1) support line (now turned to resistance). We see the case for the market to continue to favour the pair’s short positions, especially if the pound weakens on new negative Brexit headlines. Should the pair continue to be under the market’s selling interest we could see it breaking the 1.2920 (S1) support line and aiming if not breaking the 1.2850 (S2) support area. Should the market start favouring the pair’s long positions, we could see the pair aiming if not breaking the 1.3015 (R1) resistance line.
In today’s other economic highlights:
In a rather slow Monday, in the European session we get Turkey’s current account balance for September, while in the American session San Francisco Fed president Mary Daly speaks.
As for the rest of the week:
On Tuesday, we get UK’s employment data for September and Germany’s ZEW economic sentiment indicator for November. On Wednesday, Japan’s GDP preliminary growth rate for Q3 is due out along with China’s industrial Output growth rate for October. In the European session we get Germany’s and Eurozone’s preliminary GDP growth rates for Q3, UK and US inflation data for October. On Thursday, Australia’s employment data for October are to be released, UK’s retail sales growth rate for October is due out and in the American session we get the US Philadelphia Fed Business index for November and the US retail sales growth rate for October. On Friday, we get Eurozone’s CPI rate for October and the US industrial production growth rate for October.
EUR/USD H4
Support: 1.1305 (S1), 1.1250 (S2), 1.1200 (S3)
Resistance: 1.1345 (R1), 1.1385 (R2), 1.1430 (R3)
GBP/USD 4H
Support: 1.2920 (S1), 1.2850 (S2), 1.2780 (S3)
Resistance: 1.3015 (R1), 1.3075 (R2), 1.3160 (R3)
