The GBP got some support yesterday ahead of today’s Brexit vote as the EU sent its letter of reassurances about the Irish backstop issue. Despite the issue being a key point of friction in the UK parliament, analysts point out that the vote could be another defeat for Theresa May. The question raised by some analysts is not if Theresa May will lose the vote, but by what margin and should the UK PM lose by a margin wider than 100 votes, it would mark the biggest defeat in almost a century. Many UK politicians seem to be eyeing already the next phase and the Labour party seems to be targeting a general election and/or a possible new referendum about Brexit in case general elections are not possible. The vote is expected to take place in the late UK afternoon, however volatility for the pound could start earlier as Brexit headlines reel in and linger on after the vote as repercussions of the vote are to be absorbed by the markets. Cable got some support yesterday, breaking the 1.2880 (S1) resistance line (now turned to support). We could see the pound remaining under pressure as the UK parliament’s vote on Brexit is nearing and uncertainty grows. Should the pair find fresh buying orders along its path we could see the pair rising and breaking the 1.2960 (R1) aiming for the 1.3070 (R2) resistance level. Should on the other hand the pair come under the selling interest of the market, we could see it breaking the 1.2880 (S1) support line and aiming for the 1.2795 (S2) support area.
USD slips on worries of US economy losing steam
The USD slipped against some of its counterparts, as worries about the US economy losing steam increased and were fuelled by the substantial contraction in Chinese trade. Analysts point out that there seems to be a strong dislike given the Fed’s expectations, however there does not seem to be a convincing replacement and currently that could be keeping losses contained for the USD. Also it should be noted that the prolonged shutdown, seems to be also instigating a risk off sentiment for the markets which could have wider effects to the US equities markets as well as the USD. Overall, we could see the USD being sensitive to today’s financial releases and volatility emerging. EUR/USD maintained a rather sideways movement yesterday, remaining between the 1.1485 (S1) support line and the 1.1500 (R1) resistance line. Should the USD bearishness be enhanced today, we could see the pair experiencing some bullish tendencies. It should be noted that the pair may prove sensitive the US as well as the European financial releases today and today’s speakers. Should the bulls take over the pair’s direction we could see the pair breaking the 1.1500 (R1) resistance line and aim for the 1.1550 (R2) resistance hurdle. Should on the other hand the bears dictate the pair’s direction, we could see the pair breaking the 1.1485 (S1) support line and aim for the 1.1425 (S2) support barrier.
Today’s other economic highlights
In today’s European session, we get France’s final CPI (EU Norm.) reading for December, Germany’s GDP growth rate for 2018 and Eurozone’s trading balance figure for November. In the American session, we get from the US the NY Fed Mfg Index for January, the headline and core PPI rates for December and the API weekly crude oil inventories figure. As for speakers, ECB’s President Mario Draghi, Minneapolis Fed President Kashkari, Dallas Fed President Kaplan and Kansas Fed president George speak.
GBP/USD H4
Support: 1.2880 (S1), 1.2795 (S2), 1.2700 (S3)
Resistance: 1.2960 (R1), 1.3070 (R2), 1.3175 (R3)
EUR/USD H4
Support: 1.1485 (S1), 1.1425 (S2), 1.1387 (S3)
Resistance: 1.1500 (R1), 1.1550 (R2), 1.1610 (R3)
