The UK Parliament resumed sessions after the Supreme Court in a striking decision, found its suspension unlawful. UK’s Attorney General declared the UK Parliament “dead” in his speech, yet also stated that the UK government would ask for a delay in Brexit form the EU. In contrast, UK’s PM Johnson reiterated on Wednesday that he would not seek an extension to Brexit even if the recent law forces him to. However, both asked for an election, while on the flip side UK’s Labour party leader stated that if the government wants an election, it should get an extension first and then ask for an election. It should be noted though that UK’s Brexit coordinator Cove stated that there have been significant movement in Brexit talks with the EU in recent weeks. As uncertainty remains, the outlook is still negative for the GBP.
Cable dropped yesterday as the pound weakened and USD long positions were favoured, albeit there was a slight correction during the Asian session today. The pair’s drop was characterized by the breaking of the 1.2400 (R1) support line, now turned to resistance. Should negative Brexit headlines continue to dominate the news, we could see the pound weaken further. Should the bears maintain control over the pair’s direction, we could see the pair breaking the 1.2310 (S1) support line and aim for the 1.2205 (S2) support level. Should the bulls take over, we could see the pair breaking the 1.2400 (R1) resistance line, aiming for the 1.2510 (R2) resistance level.
USD strengthens as trade terms improve
The USD strengthened yesterday as the impeachment risk worries seemed to ease somewhat and there were developments in the US-Sino negotiations. The US president stated to media that the US and China were having “good conversations” and that an agreement “could happen sooner than you think”. Hopes about trade were boosted further as according to media the US and Japan signed a limited trade deal yesterday cutting tariffs on both sides. It seems that the sensitive auto industry was left out of the agreement, yet the chairman of the Japan Automobiles Manufacturers Association stated that negotiations seemed to aiming towards avoiding car tariffs. The two developments may have eased worries about the global trading terms somewhat and returned some confidence on the markets. On the political front the impeachment process still gathers the headlights of publicity, yet it may slowly become clearer that the Republican controlled Senate could fail it, hence worries seem to easy somewhat. Should the positiveness about trade continue and worries about impeaching the US president ease further, some uncertainty could be lifted from the USD.
USD/JPY rose yesterday breaking the 107.20 (S1) resistance line (now turned to support) and tested the 107.75 (R1) resistance line, albeit correcting lower during today’s Asian session. Should the pair find fresh buying orders along its path, we could see the pair breaking the 107.75 (R1) resistance line and aim for the 108.35 (R2) resistance hurdle. Should the pair come under the selling interest of the market, we could see it breaking the 107.20 (S1) support line and aim for the 106.60 (S2) support barrier.
Other economic highlights today and early tomorrow
In today’s European session, we get Germany’s GfK consumer climate for October and in the American session we get the US Final GDP rate for Q2, August’s trade balance figure and pending home sales growth rate. As for BoJ governor Kuroda, Dallas Fed President Kaplan, ECB President Draghi, ECB’s de Guindos, BoE’s Cunliffe, St. Louis Fed President Bullard, ECB’s Enria, San Francisco Fed President Daly, ECB’s de Galhau and Weidmann, Minneapolis Fed President Kashkari, Richmond Fed President Barkin are scheduled to speak.
USD/JPY H4
Support: 107.20 (S1), 106.60 (S2), 106.00 (S3)
Resistance: 107.75 (R1), 108.35 (R2), 108.90(R3)
GBP/USD H4
Support: 1.2310 (S1), 1.2205 (S2), 1.2110 (S3)
Resistance: 1.2400 (S1), 1.2510 (S2), 1.2590 (S3)
