Fundamental Analysis

Brexit Bringdown, RBA Next


Ireland is a fresh thorn in the side of Theresa May as she attempts to score a Brexit victory. The Canadian dollar was the top performer while the Swiss franc lagged. The RBA decision is up next. The EURUSD Premium short was closed for 60-90 pip gain (depending on entry), while a new JPY trade was issued.

Cable climbed early in trading on Monday on expectations for a breakthrough in EU/UK negotiations. Rumors of a divorce settlement were rampant last week and today was supposed to be the announcement. However, May and Juncker were forced to call off meetings after May's coalition partners from the Irish DUP said they wouldn't accept any form of regulatory divergence between the Britain and Northern Ireland.

The breakdown sent cable more than 100 pips lower on the headlines to just above 1.3400. It eventually bounced to 1.3475 but the quick rise and fall on the day were a reminder of a large intraday risks for GBP traders.

Meanwhile, the optimism from the Trump-Russia story faded in stocks as tech led a retreat. The Nasdaq closed 1% lower in a fresh sign of weakness. The drop came despite the GOP passing tax reform in the Senate and the correction on the ABC story. That's a sign that the good news might be priced in and that markets are increasingly concerned about a hawkish Fed.

USD/JPY followed stocks lower to close near 112.50 after rising above 113.00 early.

Looking ahead, the Australian dollar will be hogging the spotlight. First are the Aussie Q3 current account and October retail sales reports at 0030 GMT. Those are followed by the RBA decision at 0330 GMT. The overwhelming consensus is for no move from the 1.50% cash target and no signs of a shift. We will look for comments on wages and global growth as potential market movers.

Author: Ashraf LaidiWebsite:
Ashraf Laidi
Ashraf Laidi is an independent strategist and trader, founder of Intermarket Strategy Ltd and author of "Currency Trading & Intermarket Analysis". He is the former chief global strategist at City Index / FX Solutions, where he focused on foreign exchange and global macro developments pertaining to central bank policies, sovereign debt and intermarket dynamics. Ashraf had also served as Chief Strategist at CMC Markets, where he headed a global team of analysts and led seminars and trainings in four continents. His insights on currencies and commodities won him several #1 rankings with FXWeek and Reuters. Prior to CMC Markets, Laidi monitored the performance of a multi-FX portfolio at the United Nations, assessed sovereign and project investment risk with Hagler Bailly and the World Bank, and analyzed emerging market bonds at Reuters. Laidi also created the first 24-hour currency web site for traders and researchers alike on the eve of the creation of the euro. Laidi's analysis of currency markets stand out based on his distinct style in bridging the fundamental and technical aspects of the markets. Laidi regularly appears on CNBC TV (US, Europe, Arabia and Asia/Pacific), Bloomberg TV (US, Asia/Pacific, France and Spain), BNN, PBSs Nightly Business Report, and BBC. His insights also appear in the Financial Times, the Wall Street Journal and Barrons. He has given numerous interviews and lectures in Arabic, French, and to audiences spanning from Canada, Central America and Asia/Pacific.
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