Various reports and according to Liam Fox, the UK Secretary of State for International Trade, the UK parliament is aiming to avoid a hard or No deal Brexit. Strong action is also said to be taken by British lawmakers against a No deal Brexit. We must note, as time passes, the UK is heading towards an expiration date and a decision must be taken to avoid the worst case scenario which is a hard Brexit. However, the possible outcomes of the situation still consist of a no-deal Brexit, a last-minute deal, a delay or a snap election. Furthermore, during the previous days the news had a positive effect on the GBP, as the UK is seemingly leaning towards an agreement and so the market has increased demand for pounds working the British currency effectively. Further developments on the pre mentioned news could create volatility for the GBP. Since Monday, GBPUSD has been on an upsurge with the cable breaking various levels, due to the pre mentioned news and positive financial data. GBP/USD rose even further yesterday, breaking the 1.2960 (S1) resistance line (now turned to support) and today tested the 1.3070 (R1) resistance line. We could see the pair rising if there are more positive headlines about Brexit over the next couple of days. Should the pair find fresh buying orders along its path, we could see it surpassing the 1.3070 (R1) resistance line and aim for the 1.3175 (R2) resistance level. However, due to the fact that in the previous days Cable’s advancement was very evident, we may see some profit taking with the pair remaining in a sideways movement between the 1.3070 (R1) resistance level and the 1.2960 (S1) support level. In a bearish scenario, we could see the pair aiming for the 1.2960 (S1) support line with the 1.2880 (S2) support level being next and the 1.2795 (S3) support barrier being even lower.
ECB Interest Rate Decision In Focus
The ECB is highly probable to keep interest rates on hold at 0.00%, with a current probability of 97.57%, according to EUR OIS. A significant subject to be discussed could be the dropping inflation levels in December, and having to deal with sovereign-debt pressures by some members, especially Mediterranean countries. Based on a recent reduced growth outlook, the ECB could be forced to apply a conditional interest-rate guidance, leaving open the possibility of a new quantitative-easing program, should economic conditions deteriorate further. Other matters that could also be discussed, are the future effect from potential trade tensions and analysis on world growth and were the Eurozone stands according to the subjects. Should the dovish elements prevail in the accompanying statement and following press conference, we could see volatility for the EUR. EURUSD has managed to break the bearish momentum it had formed during last week and moved in a sideways movement with some bullish tendencies. During the past week, EURUSD has been trading in-between the 1.1387 (R1) resistance level and the 1.1350 (S1) support level. In the previous hours the pair has moved higher and tested the 1.1387 (R1) resistance level attempting to move even higher. If in the accompanying statement of the ECB meeting today, Mario Draghi sends some positive signals, the pair could trade in a bullish momentum with chances of breaching the 1.1387 (R1) resistance level and the 1.1425 (R2) or even the 1.1465 (R3) resistance barriers. On the contrary, if dovish signals are released during the statement or from European financial releases today, the pair could move downward towards the 1.1350 (S1) support level with the 1.1305 (S2) and the 1.1265 (S3) levels following even lower.
Today’s other economic highlights
In today’s European session, we get from Germany the Preliminary Manufacturing PMI, along with Eurozone’s Preliminary Composite PMI, both for January. Then, Norway’s Norgesbank interest rate Decision is to be released. Later in the European session, the star of the day is the Eurozone’s ECB Interest rate decision and shortly after we have ECB’s Mario Draghi press conference. In the American session, we get from the US the Preliminary Markit Mfg PMI and later on again from the US, the EIA crude oil inventories.
GBP/USD H4
Support: 1.2960 (S1), 1.2880 (S2), 1.2795 (S3)
Resistance: 1.3070 (R1), 1.3175 (R2), 1.3280 (R3)
EUR/USD H4
Support: 1.1350 (S1), 1.1305 (S2), 1.1265 (S3)
Resistance: 1.1387 (R1), 1.1425 (R2), 1.1465 (R3)
