The pound strengthened against the USD on Friday, as UK’s Brexit Secretary Raab, implied that the UK could show some flexibility regarding the Irish border issue. Bloomberg reported that the UK may be dropping the requirement for the Irish border backstop issue to have a fixed end date, in order to achieve a breakthrough in the Brexit negotiations. UK’s PM Theresa May, will be explaining her Brexit strategy in parliament today, in an effort to reassure it. Headlines could be made today, as she is under pressure from hard Brexiteers and volatility could rise for the pound.
Cable strengthened on Friday, clearly breaking the 1.3025 (S1) resistance line (now turned to support). The pound is expected to be heavily Brexit driven (inner political stage as well as Brexit negotiations with EU) in the next few days as there is an absence of important financial releases. Should there be negative headlines regarding the UK political scene or the ongoing Brexit negotiations we could see the pound weakening and vice versa. Technically it should be noted that the pair has broken the downward trendline incepted since the 16th of October, hence we lift our bearish bias. Should the bears be in charge of the pair’s direction we could see the pair breaking the 1.3025 (S1) support line and aiming for the 1.2965 (S2) support barrier. Should on the other hand the pair’s direction be dictated by the bulls, we could see the pair breaking the 1.3060 (R1) resistance line and aim for the 1.3145 (R2) resistance hurdle.
Euro strengthens on Brexit news, however remains shaky
The common currency strengthened against the USD on Friday, as the Brexit headlines reeled in. However, the common currency could experience volatility also due to the Italian budget deficit issue. Italy is expected to explain to the Commission the breach of rules until today. The recent Italian persistence on the planned deficit, could continue to exist in its reply. Should the Commission reject the explanations and the Italian budget, there could be sanctions for Italy, increasing volatility for the EUR.
EUR/USD strengthened yesterday, breaking the 1.1480 (S1) resistance line (now turned to support), testing the 1.1525 (R1) resistance level. As the pair broke the downward trendline incepted since the 16th of October, we lift our bearish bias. Should the market continue to favour the pair’s long positions, we could see the pair breaking the 1.1525 (R1) resistance line and aim for the 1.1577 (R2) resistance level. Should the pair come under the market’s selling interest, we could see it breaking the 1.1480 (S1) support line and aim for the 1.1430 (S2) support zone.
In today’s other economic highlights:
In a rather poor in financial releases Monday, we get from Canada the wholesale sales growth rate for August.
As for the rest of the week:
On Tuesday, we get Eurozone’s preliminary consumer confidence indicator for October. On Wednesday, we get from Sweden, Riksbank’s interest rate decision, Germany’s preliminary manufacturing PMI for October and Canada’s BoC interest rate decision. On Thursday, we get Germany’s GfK consumer sentiment indicator for November and the Ifo Business climate indicator for October. Be advised that Norgesbank, CBRT and ECB will be releasing their respective interest rate decisions on Thursday. On Friday, we get the US preliminary GDP growth rate for Q3.
EUR/USD 4H
Support: 1.1480 (S1), 1.1430 (S2), 1.1360 (S3)
Resistance: 1.1525 (R1), 1.1577 (R2), 1.1620 (R3)
GBP/USD 4H
Support: 1.3025 (S1), 1.2965 (S2), 1.2920 (S3)
Resistance: 1.3060 (R1), 1.3145 (R2), 1.3190 (R3)
