The UK parliament is to vote on Theresa May’s revised Brexit plan, with 60 days left for the UK to leave the EU. Analysts currently seem to maintain the opinion that should Theresa May’s plan B pass, we could see the pound strengthening. On the other hand, should Parliament opt to pass an amendment (Cooper) delaying Brexit by extending article 50, in case of no deal by February 26th, the pound could also be supported, as imminent danger is being postponed. It should be noted that a no deal Brexit cannot be ruled out and an amendment tabled to scrap the Irish backstop (Brady), if voted by the UK parliament could raise the chances for such a scenario. Media reported that Theresa May, could be preferring the Brady amendment, as in such a scenario the UK Parliament would be sending a clear message to Brussels about the Irish backstop. We expect the event to create high volatility for the pound and should the UK parliament move towards an agreed Brexit solution we could see the pound strengthening. Please be advised that media indicate that the voting will take place in the UK evening, probably begin at 19:00 (GMT). Cable maintained a sideways motion yesterday, below the 1.3175 (R1) resistance line. Technically, it should be noted that the pair’s price action threatens to break the upward trendline incepted since the 21st of January, making the particular moment a make or break point for the pair’s direction. Should the pair break the prementioned upward trendline we could see it maintaining a sideways movement, if not we maintain the bullish momentum. Should the bulls dictate the pair’s direction, we could see the pair breaking the 1.3175(R1) resistance line and aim if not break the 1.3280 (R2) resistance level. Should the bears take over we could see cable, breaking the 1.3070 (S1) support line and aim for the 1.2960 (S2) support level. The pair’s price action is expected to show high volatility (to either direction) today, as the UK parliament will be having another vote regarding Brexit, so some caution is advisable as in extreme case scenarios, we could see cable breaking all three support or resistance levels.
US-Sino trade tensions rise as US charges Huawei
The US on Monday pressed charges against Huawei, its chief financial officer and two affiliates with bank and wire fraud to violate sanctions against Iran. According to media China has expressed serious concerns about the US charges against Huawei and the Chinese foreign ministry stated that Beijing would protect the lawful interests of Chinese companies. The escalation of the case, which has already increased tensions between the two countries (and Canada) may threaten the imminent US-Sino trade negotiations this week. Analysts point out that, after the US pressing charges on Huawei, there may be much less of a chance for the US-Sino negotiations to produce positive results. We see the case for any possible negative effects to hit the equity markets and the AUD, while on the other hand it could support safe haven assets like JPY. AUD/USD retained a range bound movement yesterday and during today’s Asian session, testing the 0.7150 (S1) support line. We could see the pair maintaining its sideways movement, yet we retain reservations for a possible bearish outlook for the pair as the fundamentals could be may not favor the AUD side. Should the pair come under the selling interest of the market, we could see it breaking the 0.7150 (S1) support line and aim for the 0.7065 (S2) support barrier. Should the market favor the pair’s long positions, we could see the pair breaking the 0.7230 (R1) resistance line and aim for higher grounds.
Today’s other economic highlights
In today’s American session, we get from the US the CB consumer confidence indicator for January and later on the API weekly crude oil inventories figure. As for speakers BoE’s Andy Haldane speaks.
GBP/USD H4
Support: 1.3070 (S1), 1.2960 (S2), 1.2830 (S3)
Resistance: 1.3175 (R1), 1.3280 (R2), 1.3365 (R3)
AUD/USD H4
Support: 0.7150 (S1), 0.7065 (S2), 0.6930 (S3)
Resistance: 0.7230 (R1), 0.7330 (R2), 0.7420 (R3)
