Theresa May won the motion for a confidence vote yesterday, tabled by the Labour party by a margin of 19 votes securing for the time being her position. Attention now, turns to Theresa May’s plan B and analysts expect the plan not to differ much if compared to her previous Brexit deal, in which case the UK parliament could reject it once again. The expectation for Theresa May seeking cross party backing for a new deal could provide reassurance, however we expect little from such efforts. Also expectations for a softer Brexit may have risen according to analysts, as the opposition seems to be seeking closer ties with the EU. We could see volatility being maintained for the pound and the currency to remain Brexit driven. Cable maintained a sideways motion yesterday, continuously testing the 1.2880 (R1) resistance line, unable to clearly break it. We maintain an outlook for a range bound movement today, however the pair could experience volatility, should there be any Brexit headlines, for example the EU being willing for some concessions, or hard Brexiteers delivering a preemptive strike on any plan B of Theresa May. Should the pair come under the market’s selling interest we could see cable aiming if not breaking the 1.2795 (S1) support line. Should on the other hand the pair’s long positions be favored by the market, we could see it breaking clearly the 1.2880 (R1) resistance line and aim if not break the 1.2960 (R2) resistance level.
USD remains steady after gains made
The USD remained steady yesterday against a number of its counterparts, after gains made in previous sessions especially against the EUR. Persistent worries about the Eurozone economy seem to weigh on EUR/USD and financial releases as well as ECB official’s statements seem to strengthen arguments for a bearish market of the pair. Across the Atlantic, the US government shutdown seems to remain the main theme and may have started to take its toll on the economy, however analysts point out also that the Fed’s rate hike cycle could be approaching its end and some even are mentioning possible rate cuts. Never the less, a possible rate cut this year, currently seems as a remote scenario in our view, for the time being. Please be advised, that in a recent report the Fed had indicated that US businesses have become less optimistic in recent months and we see the case for the conclusion to strengthen Fed’s recent comments about “patience” on interest rate hikes. EUR/USD maintained a rather sideways movement yesterday, continuously testing and finally breaking during today’s late Asian session, the 1.1387 (R1) support line (now turned to resistance). We maintain the view of a bearish market for the pair, as a downward trendline is forming since the 10th of January and consecutive lower peaks appear on the 11th and 15th of January. For our view to change, we would require the pair’s price action to clearly break the prementioned downward trendline. Should the bears continue to dictate the pair’s direction, we could see the pair breaking the 1.1350 (S1) support line and aim for lower grounds. Should on the other hand the bulls take over, we could see the pair breaking the 1.1387 (R1) resistance line and aim for the 1.1425 (R2) resistance barrier.
Today’s other economic highlights
In today’s European session, we get Eurozone’s final HICP reading for December. In the American session, we get from the US, the number of building permits and housing starts for December, as well as the initial jobless claims figure. As for speakers, ECB’s Sabine Lautenschlager, BoE’s Governor Mark Carney and Sam Woods as well as Fed’s Randal Quarles speak.
GBP/USD H4
Support: 1.2795 (S1), 1.2700 (S2), 1.2630 (S3)
Resistance: 1.2880 (R1), 1.2960 (R2), 1.3070 (R3)
EUR/USD H4
Support: 1.1350 (S1), 1.1305 (S2), 1.1265 (S3)
Resistance: 1.1387 (R1), 1.1425 (R2), 1.1465 (R3)
