The pound rose rallied yesterday and during today’s Asian session, as UK’s Theresa May and EU Commission President Juncker announced that they struck an improved deal about the Irish backstop. Late yesterday evening, May and Juncker announced three documents which aim to address the Irish backstop issue. Despite the changes not being quite clear yet, it seems that the revised deal may include some form of legally binding assurances for the temporary nature of the Irish backstop. The document is expected to be scrutinized ahead of the UK parliament’s sitting and the UK Attorney General still has to endorse the deal. The main political development for today’s vote is that Theresa May could have an actual chance to pass her new deal through the UK Parliament, should there be substantial changes. It would be characteristic that EU commission president Juncker stated that the choice is between this deal and reversing Brexit. Cable rallied yesterday breaking all of our resistance lines and landing above the 1.3175 (S1) resistance line (now turned to support). We expect to see more volatility (either direction) for the pair as both currencies are expected to have increased volatility today, yet the main event for the day is expected to be the UK parliament’s vote tonight. We could see the pair reversing direction or moving even higher depending on the outcome of the vote. Also the pair may prove sensitive to any announcements during the day about Brexit. Should the pair find fresh buying orders along its path, we could see it breaking the 1.3265 (R1) resistance line and aim for higher grounds. On the other hand should the pair come under the selling interest of the market, we could see it breaking the 1.3175 (S1) and aim if not break the 1.3070 (S2) support line. Please be advised once again that should Theresa May’s new Brexit deal be approved by the UK parliament, we could see the pound rallying at very high levels as it could once again break all of our resistance lines. If the UK parliament rejects the deal, we expect the pound to weaken substantially, yet the market may remain in anticipation of the next vote on Wednesday.
USD remains rather steady at modest growth of US retail sales
The USD remained rather steady yesterday as a modest growth of the US retail sales growth rate was released for January. Analysts point out that risk sentiment seems to be back on and may weaken the USD somewhat in the coming sessions. It was characteristic that the dollar index was down by 0.2%, as investor’s preferred riskier assets yesterday. Should the current mood be maintained, we could see the USD starting to weaken, yet today’s financial releases could be of the essence. EUR/USD rose yesterday testing the 1.1260 (R1) resistance line. Should the upward trendline incepted since the 8th of March be maintained, we could see the pair continue to trade in a bullish market, should it clearly break it, we could see the pair maintaining a sideways movement. We expect the pair to be fundamentally influenced by today’s financial releases, as well as the UK Parliament’s vote tonight. Should the bulls maintain control of the pair’s direction, we could see the pair breaking the 1.1260 (R1) resistance line and aim for the 1.1300 (R2) resistance barrier. Should on the other hand the bears take over, we could see the pair breaking the 1.1215 (S1) support line and aim for lower grounds.
Today’s other economic highlights
In today’s European session we get Sweden’s CPI rate for February, UK’s GDP growth rate for January and UK’s manufacturing output for January. In the American session, we get the US CPI rates for February and in tomorrow’s Asian session, we get Japan’s corporate goods prices for February and Japan’s machinery orders growth rate for January. Also please be advised that Fed’s Lael Brainard speaks today.
GBP/USD
Support: 1.3175 (S1), 1.3070 (S2), 1.2960 (S3)
Resistance: 1.3265 (R1), 1.3350 (R2), 1.3450 (R3)
EUR/USD H4
Support: 1.1215 (S1), 1.1165 (S2), 1.1125 (S3)
Resistance: 1.1260 (R1), 1.1300 (R2), 1.1340 (R3)
