GBP strengthened against the USD yesterday, as trader’s optimism for a soft Brexit grew and that a no-deal Brexit could be avoided, according to analysts. Despite the fact that a number of scenarios are still possible, market analysts believe that chances for a hard Brexit have lessened substantially. There seems to have been an initial push for the pound as Corbyn stated that the Labour party could back a second referendum and also wanted to exclude the possibility of a no-deal Brexit. It should be noted that Theresa May seems currently unwilling to blur her red lines, which seems to result in a political stalemate in the negotiations with the other political parties. We expect volatility to continue to characterize the pound’s course, as new Brexit headlines could tip it to either side. Cable rallied yesterday, breaking consecutively the 1.2880 (S2) and the 1.2960 (S1) resistance lines, now turned to support. It should be noted on the technical side that the pair has reached a two month high that the pair has reached We could see the pair trading in a bullish market should expectations for a soft Brexit linger on, however it should be noted that cable may prove sensitive to any further Brexit headlines and could tip to either direction. Also the UK financial releases today could weaken the GBP side of the pair. Should the pair find fresh buying orders along its path, we could see the pair aiming if not breaking the 1.3070 (R1) resistance line. Should it come under the market’s selling interest we could see the pair breaking the 1.2960 (S1) support line and aim for the 1.2880 (S2) support level.
USD strengthens against the Yen, on US-Sino trade expectations
The USD strengthened against the JPY during yesterday’s American session and today’s Asian session as hopes for the US-Sino negotiations seem to grow and risk appetite seems to have increased. Media reported that US Treasury Secretary Mnuchin, considered easing tariffs imposed on Chinese imports. It should be noted that the positive sentiment was maintained despite a Treasury spokesman denying the report later on. Analysts are expected to focus on the upcoming visit of Chinese Vice Premier Liu He near the end of the month for further developments. It should be noted that unfavourable financial releases for the Yen, early this morning also may have strengthened a bullish sentiment for the pair. USD/JPY rose yesterday and during today’s Asian session, breaking the 109.20 (S1) resistance line, now turned to support. We could see the pair trading with bullish tendencies today, should the risk-on sentiment continue to favour the USD against the JPY, however the pair may prove sensitive to today’s financial releases as well. Should the bullish momentum be maintained, we could see the pair aiming for the 110.15 (R1) resistance line. Should on the other hand the bears take over, we could see the pair breaking the 109.20 (S1) support line and aim for the 108.25 (S2) support barrier.
Today’s other economic highlights
In today’s European session, we get Eurozone’s current account figure for November and the UK retail sales growth rates for December. In the American session, we get Canada’s inflation rates for December and from the US the industrial output growth rate for December, the preliminary Michigan Consumer Sentiment indicator for January and last but not least the Baker Hughes oil rig count. As for speakers, NY Fed President John Williams and Philadelphia Patrick Harker speak.
GBP/USD H4
Support: 1.2960 (S1), 1.2880 (S2), 1.2795 (S3)
Resistance: 1.3070 (R1), 1.3175 (R2), 1.3280 (R3)
USD/JPY H4
Support: 109.20 (S1), 108.25 (S2), 107.40 (S3)
Resistance: 110.15 (R1), 111.40 (R2), 112.55 (R3)
