The UK parliament defeated Theresa May in a symbolic vote as it refused to back her Brexit plan, as hard Brexiteers refused to back her. The UK government still has the chance to renegotiate Brexit, yet her position against her EU counterparts may have been undermined. The defeat, enhances worries on her ability to persuade the UK parliament of her plan or to convince the EU for further concessions. The next big date for Theresa May would be the 27th of February when she is expected to return to the UK Parliament for another vote. Markets seem to grow more and more anxious about Brexit as time passes by and there seems to be no light at the end of the tunnel. The pound weakened on the result and we expect uncertainty to continue to weigh on the pound. Cable albeit breaking the downward trendline incepted since the end of January for a short while, ultimately dropped below it, breaking the 1.2830 (R1) support line (now turned to resistance). It would seem as the bearish momentum continues for the pound, albeit we could see today’s financial releases affecting the pairs’ direction, as well as any further Brexit headlines. Should the bears continue to be in control of the pair’s direction, we could see it aiming if not breaking the 1.2710 (S1) support line. On the other hand should the bulls take over, we could see the pair breaking the prementioned downward trendline, the 1.2830 (R1) resistance line and aim for higher grounds
USD weakens on soft retail sales.
The USD weakened yesterday as the US retail sales for December marked their sharpest drop in over 9 years reaching -1.2% mom. The contraction suggested also a considerable slowdown in US economic activity at the end of 2018, magnifying the effect. Analysts point out that the poor retail sales data has reinforced the view that the Fed could keep interest rates unchanged for 2019. We also expect that the outcome of the US-Sino negotiations, due out today, could influence USD’s direction. The top two US negotiators are expected to meet with Chinese President Xi today and some announcements could be expected. Despite lots of ink being spilled of a possible extension of the US tariff deadline of 1st of March, such intentions were not made official. We could see further developments on the issue over the weekend and President’s day on Monday to influence the USD’s direction. EUR/USD spiked yesterday at the release of the US retail sales growth rate for December, testing the 1.1300 (R1) resistance line, yet failing to clearly break it and ultimately correcting lower during the Asian session today. We could see the pair trading in a sideways manner yet the US financial releases as well as any headlines regarding the US-Sino negotiations could affect the pair’s direction. Should the pair come under selling interest of the market, we could see the pair breaking the 1.1260 (S1) support line and aim for lower grounds. Should on the other hand the pair find fresh buying orders along its path, we could see it breaking the 1.1300 (R1) resistance line and aim for the 1.1345 (R2) resistance level.
Today’s other economic highlights
In today’s European session, we get from the UK the retail sales growth rates for January and from the Eurozone the trade balance figure for December. In the American session, from the US we get the NY Fed Mfg Index, the industrial and manufacturing production growth rates for January, the preliminary University of Michigan Consumer Sentiment for February, and the Baker Hughes oil rig count. As for speakers, please note that Atlanta Fed President Raphael Bostic will be speaking.
GBP/USD H4
Support: 1.2710 (S1), 1.2600 (S2), 1.2485 (S3)
Resistance: 1.2830 (R1), 1.2960 (R2), 1.3070 (R3)
EUR/USD H4
Support: 1.1260 (S1), 1.1215 (S2), 1.1265 (S3)
Resistance: 1.1300 (R1), 1.1345 (R2), 1.1385 (R3)
