HomeContributorsFundamental AnalysisPound Weakens As UK Parliament Is Suspended

Pound Weakens As UK Parliament Is Suspended

The pound fell against the USD, to the lowest levels for the past seven days as Boris Johnson requested and was granted by the Queen of the UK, to suspend the UK Parliament. According to media the suspension is to come into effect on a day between September 9th and 12th and last until the 14th of October. Given that the Brexit deadline is on October 31st, the UK Parliament may have a tight time limit if any, to prevent a possible hard Brexit. Analysts tend to point out, that the situation is similar to a constitutional crisis with the outcome being quite uncertain. Also, it seems to be the case that MP Miller plans to legally challenge the suspension of Parliament. On another note, the Scottish Tory leader Ruth Davidson, seems to be preparing to resign weakening substantially the Conservative Party. It should be noted that the pound’s drop was further fuelled by the market already being bearish on the pound. We expect the pound to remain under pressure in the coming days, yet volatility is clearly in the agenda for the sterling. Cable dropped yesterday, breaking temporarily the 1.2210 (R1) support line, turned to resistance. We would like to point out that the pair seems to stabilise around the 1.2210 (R1) resistance line, yet we could see some bearish tendencies in the pair’s direction, should there further negative headlines about Brexit. Should the bears take over once again, we could see the pair breaking the 1.2135 (S1) support line aiming for lower grounds. Should on the other hand the bulls dictate the pair’s direction, we could see the pair breaking the 1.2210 (R1) and aim if not break the 1.2290 (R2) resistance line.

JPY remains stable as confidence slowly returns to the markets.

JPY remained rather stable yesterday against the USD, as slowly confidence seems to return to the markets. It should be noted that at some point during the American session the USD even held gains against the Japanese currency. Analysts tend note that the sentiment in the markets remain fragile as the US treasury yield curve remains inverted. Also, analysts tend to note that the minor gains in the USD Index, tempered fears and showed some risk sentiment positiveness. It should also be noted that the markets seem to remain concerned about the US-Sino relationships. We expect today’s financial releases to provide further volatility for the markets and tend to concentrate more on USD/JPY and EUR/USD. EUR/USD maintained a sideways movement yesterday between the 1.1100 (R1) resistance line and the 1.1050 (S1) support line. As the pair’s price action broke the downward trendline incepted since the 26th of August , we switch our bearish outlook, in favour of a sideways movement, yet volatility could be present for the pair as a number of financial releases affecting the pair are expected today. Should the pair come under the selling interest of the market we could see EUR/USD breaking the 1.1050 (S1) support line and aim for the 1.1000 (S2) support level. Should the pair’s long positions be favoured by the market, we could see it breaking the 1.1100 (R1) resistance line and aim for the 1.1140 (R2) resistance level.

Other economic highlights today and early tomorrow

Today we during the European session, we get Norway’s GDP growth rate for Q2, Germany’s unemployment data and preliminary HICP rate for August, as well as Eurozone’s economic sentiment indicator for August. In the American session, we get the 2nd release of the US GDP growth rate for Q2, Canada’s current account balance for Q2 and the US pending home sales rate for July. In tomorrow’s Asian session, we get from Japan the Tokyo Core CPI rate for August, the preliminary industrial production growth rate for July, the retail sales growth rate for July and from Australia the building approvals growth rate for July.

GBP/USD H4

Support: 1.2135 (S1), 1.2050 (S2), 1.1940 (S3)
Resistance: 1.2210 (R1), 1.2290 (R2), 1.2370 (R3)

EUR/USD H4

Support: 1.1050 (S1), 1.1000 (S2), 1.0950 (S3)
Resistance: 1.1100 (R1), 1.1140 (R2), 1.1190 (R3)

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