The US Dollar was on the defensive yesterday, as the US retail sales growth rate slowed down and an escalation occurred in a dispute with Saudi Arabia. Tensions in the US-Saudi relationships escalated, when a self exiled Saudi journalist disappeared and the US president vowed to take action if Saudi Arabia was involved in the disappearance. The Saudis responded by implying for the first time in more than 40 years, that oil could be used as a weapon for pressure. Tensions de-escalated partly yesterday, as the US president stated that “rogue killers” may be responsible, lifting blame from Saudi Arabia. Should there be further headlines we could see volatility rising for the USD.
EUR/USD rose yesterday breaking the 1.1577 (R1) resistance level, however corrected later on by testing it. The pair could have some bearish tendencies today as the financial releases could weaken the EUR, but could also prove sensitive to any further USD weakness. Should the pair come under the market’s selling interest we could see it aiming if not breaking the 1.1525 (S1) support line. Should on the other hand the market favor the pair’s long positions we could see it breaking the 1.1577 (R1) resistance line and aim for the 1.1630 (R2) resistance barrier.
Brexit tones drop, ahead of EU Summit
UK’s PM Theresa May had a more pacifying tone regarding Brexit yesterday, after negotiations broke down a day before. Theresa May stated that she does not believe that the UK and the EU are far apart. The EU side followed, as French president Macron stated that “collective intelligence” could prevail. As per media, EU diplomatic sources characterized the recent stalemate as “more of a pause than a breakdown”. Further volatility could be expected for the pound, as the EU summit draws near and the two sides have not excluded further progress during the summit.
Cable rose, as the positive climate for Brexit started to form once again and broke the 1.3150 (R1) resistance line, however corrected later on, below it. We could see the pair having some bullish tendencies as the financial releases later in the day could favour the pound while at the same time weaken the USD somewhat and the pair could also get some support from any possible positive headlines regarding Brexit. Should the bulls dictate the pair’s direction once again, we could see the pair breaking the 1.3150 (R1) and aiming if not breaking the 1.3215 (R2) resistance line. Should the bears take over, the pair could aim if not break the 1.3080 (S1) support line.
In today’s other economic highlights:
During the European session, we get the UK employment data for August and Germany’s ZEW economic sentiment indicator for October. Later on, we get New Zealand’s milk auction figures and in the American session, from the US we get the industrial production growth rate for September. Last but not least, we get the API weekly crude oil figure for last week. As for speakers, San Francisco Fed president Mary Daly speaks.
EUR/USD 4H
Support: 1.1525 (S1), 1.1480 (S2), 1.1430 (S3)
Resistance: 1.1577 (R1), 1.1630 (R2), 1.1673 (R3
GBP/USD 4H
Support: 1.3080 (S1), 1.3025 (S2), 1.2965 (S3)
Resistance: 1.3150 (R1), 1.3215 (R2), 1.3285 (R3)
