The pound rallied yesterday as the UK Parliament defeated the government in a vote to block a no deal Brexit scenario. The blocking passed into law with a 327 to 299 majority, once again confirming the Tory rebel’s stance. It should be noted that the UK Parliament also rejected Boris Johnson’s request for a snap election, however that scenario still looms. It was indicative that Boris Johnson stated that if he is still Prime Minister on the 31st of October the UK would leave the EU with a better deal. Analysts tend to note that chances for the UK leaving the EU with a deal have increased substantially and expect the pound to rally in such a scenario. We expect volatility to be maintained for the pound as further developments may still be on the way about Brexit. Cable continued to rise yesterday as it broke the 1.2135 (S2) resistance line and the 1.2210 (S1) resistance level, both now turned to support, yet corrected a bit lower during todays Asian session. Should the positive news continue for Brexit, we could see the pair rising further today. If the pair finds fresh buying orders along its path, we could see the pair breaking the 1.2310 (R1) resistance line and aim for the1.2390 (R2) resistance hurdle. On the flip side should the correction continue, and cable come under the selling interest of the market we could see it breaking the 1.2210 (S1) support line and aim for the 1.2135 (S2) support barrier.
Trade tensions ease as US-Sino talks are announced
Safe havens weakened somewhat as investor’s confidence got a boost from the announcement of US-Sino trade talks for next month. The Chinese commerce ministry announced that talks are to be held in Washington early October, after a phone call made between the Chinese Vice President Liu He and US Trade Representative Robert Lighthitzer. Analysts tend to note that a fair amount of optimism seems to have been injected into the markets after a number of positive headlines emerged about the US-Sino relationships, Brexit and the Hong Kong political crisis. Analysts also expect that should there be no negative developments, we could see the risk on Sentiment continue to characterize the markets. Should that be the case, we could see safe havens such as the yen weakening, while at the same time the Aussie and the Kiwi strengthening. USD/JPY rose yesterday and during today’s Asian session tested the 106.60 (R1) resistance line. Should there be further easing of trading tensions and a boost in investor’s confidence we could see the pair maintaining its bullish tendencies. Should the bulls maintain control over the pair’s direction we could see it breaking the 106.60 (R1) resistance line and aim for the 107.20 (R2) resistance level. Should the bears take over, we could see the pair breaking the 106.00 (S1) support line and aim for lower grounds.
Other economic highlights today and early tomorrow
Today during the European session, we get Switzerland’s GDP growth rate for Q2, Germany’s Factory orders growth rate for July and from Sweden Riksbank’s interest rate decision. In the American session, we get from the US the ADP employment change figure August, the ISM non mfg PMI for August, the factory orders growth rate for July and the EIA crude oil inventories figure. In tomorrow’s Asian session we get Japan’s household spending growth rate for July. As for speakers please note that ECB Vice President de Guindos, Riksbank Governor Ingves, BoE’s Ramsden, BoE’s Bell, BoC Deputy Governor Schembri and SNB’s Chairman Tomas Jordan speak.
USD/JPY H4
Support: 106.00 (S1), 105.30 (S2), 104.65 (S3)
Resistance: 106.60 (R1), 107.20 (R2), 107.75 (R3)
GBP/USD H4
Support: 1.2210 (S1), 1.2135 (S2), 1.2050 (S3)
Resistance: 1.2310 (R1), 1.2390 (R2), 1.2500 (R3)
