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UK Needs To Face Up To ‘Hard Facts’ On Brexit, Warns Theresa May
For the 24 hours to 23:00 GMT, the GBP slightly rose against the USD and closed at 1.3786 on Friday.
On Friday, Britain’s Prime Minister, Theresa May, in a much-awaited Brexit speech, acknowledged that the UK and the European Union (EU) would have reduced access to each other’s markets after Brexit. However, she insisted that Britain wanted the “broadest and deepest possible agreement” and that the nation was close to agreeing the terms of an implementation period that will help smooth the country’s departure from the EU. Further, she conceded that no side can get exactly what it wants in Brexit negotiations. Commenting on the European Court of Justice jurisdiction, she stated that its existence, and its rulings, will continue to impact the UK.
Separately, data revealed that UK’s Markit construction PMI registered a rise to a level of 51.4 in February, compared to a 4-month low level of 50.2 in the prior month, while investors had envisaged for a rise to a level of 50.5.
In the Asian session, at GMT0400, the pair is trading at 1.3793, with the GBP trading 0.1% higher against the USD from Friday’s close.
The pair is expected to find support at 1.3760, and a fall through could take it to the next support level of 1.3728. The pair is expected to find its first resistance at 1.3821, and a rise through could take it to the next resistance level of 1.3850.
Trading trend in the Pound today is expected to be determined by the release of UK’s Markit services PMI for February, due in a few hours.
The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.
Japan’s Services Sector Activity Eased In February
For the 24 hours to 23:00 GMT, the USD declined 0.49% against the JPY and closed at 105.54 on Friday.
The Japanese Yen jumped against the USD, after the Bank of Japan (BoJ) Governor, Haruhiko Kuroda, hinted that the central bank may consider about withdrawing its quantitative-easing program in 2019.
In the Asian session, at GMT0400, the pair is trading at 105.54, with the USD trading flat against the JPY from Friday’s close.
Overnight data showed that Japan’s Nikkei services PMI declined to a level of 51.7 in February, compared to a reading of 51.9 in the prior month.
The pair is expected to find support at 105.14, and a fall through could take it to the next support level of 104.75. The pair is expected to find its first resistance at 106.04, and a rise through could take it to the next resistance level of 106.55.
The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.
Swiss Franc Extends Its Gains In The Morning Session
For the 24 hours to 23:00 GMT, the USD declined 0.44% against the CHF and closed at 0.9369 on Friday.
In the Asian session, at GMT0400, the pair is trading at 0.9362, with the USD trading 0.07% lower against the CHF from Friday’s close.
The pair is expected to find support at 0.9331, and a fall through could take it to the next support level of 0.9299. The pair is expected to find its first resistance at 0.9402, and a rise through could take it to the next resistance level of 0.9441.
Amid no key macroeconomic releases in Switzerland today, investor sentiment would be governed by global macroeconomic events.
The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.
Loonie Trading Marginally Higher In The Morning Session
For the 24 hours to 23:00 GMT, the USD rose 0.49% against the CAD and closed at 1.2896 on Friday.
The Canadian Dollar lost ground against the USD, after Canada’s annualised gross domestic product (GDP) advanced less-than-anticipated by 1.7% on a quarterly basis in the final three months of 2017, compared to market expectations for a rise of 2.0%. The nation’s GDP had registered a revised growth of 1.5% in the previous quarter.
In the Asian session, at GMT0400, the pair is trading at 1.2894, with the USD trading a tad lower against the CAD from Friday’s close.
The pair is expected to find support at 1.2842, and a fall through could take it to the next support level of 1.2790. The pair is expected to find its first resistance at 1.2931, and a rise through could take it to the next resistance level of 1.2968.
The currency pair is trading above its 20 Hr and 50 Hr moving averages.
Trump: EU has been brutal to us
Trump counter-attacked on EU's criticism on his steel and aluminum tariff. He tweeted again during the weekend that the European Union has been "brutal to us". And he warned that "if the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S."
That was in reaction to European Commission President Jean-Claude Juncker's statement that "we will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk.
Asian session data update: China Caixin PMI services dropped
China Caixin PMI services dropped 0.5 to 54.2 in February. Key points are:
- Softer increases in activity across both the manufacturing and service sectors
- New order growth slows at services companies, but picks up at manufacturers
- Input price inflation subsides
Summary:
SPD members vote on German grand coalidtion: 66% for, 34% against
Angela Merkel secured her fourth term as Chancellor of Germany. Members of the Social Democrats voted for the coalition deal with Merkels' CDU/CSU. Months of political uncertainty has now ended. The SPD's vote results were overwhelming, with 66% supporting, and only 34% rejecting.
Italy election: No clear winner, Euro steady
In Italy, based on the early vote counts, there will be no clear winner in the election. Center-right coalition of former Primer Minister Silvio Berlusconi is heading for a win in the election, but falls short of a majority. That means, it will take weeks of negotiations before a government could be formed. Anti-establishment Five Star movements to come in second place. Center-left coalition by the governing Democratic Party will come in third.
Euro has little reaction and is steady.
NTC Director Peter Navarro: Exemptions on steel and aluminum tariffs possible, but no exclusions
White House Director of the National Trade Council, Peter Navarro commented on Trumps' tariffs on Sunday:
- Exemptions and exclusions are different
- "There'll be an exemption procedure for particular cases where you need to have exemptions so that business can move forward."
- " At this point in time, there'll be no country exclusions."
- "As soon as he (Trump) starts exempting countries, he has to raise the tariff on everybody else."
- "As soon as he exempts one country, his phone starts ringing with the heads of state of other countries."
Trump is expected to formally sign an order for the 25% tariff on steel and 10% on aluminum this week.
Market Morning Briefing: Dow Has Support In The 24000-23600
STOCKS
Dow (24538.06, -0.29%) has support in the 24000-23600 region which is likely to test in the coming sessions. The support as visible on the 3-day candle chart is likely to hold in the medium term, pushing back the index towards 25200 again. But for now the index looks bearish towards 23600.
Dax (11913.71, -2.27%) is almost at the medium term horizontal support on the weekly candles. While the support holds, the index may have some scope of moving back towards 12400 and higher in the medium term; else a break below the current weekly support could indicate a fall towards 11400 soon.
Nikkei (21043.61, -0.65%) is trading just above the important support near 21000. If that produces a bounce, the index may well head back towards 22500; else could come off gradually towards 20000. Keep an eye on price action at 21000.
Shanghai (3240.39, -0.43%) is holding well below resistance near 3350. Also there is current resistance on the daily candles near 3270. While this holds, the near term view for the index is bearish towards 3150-3100.
Nifty (10458.35, -0.33%) is likely to trade within the narrow 10560-10380 region looking at the daily candles but there is enough room on the upside if the medium term channel support near 10400-10380 holds and pushes the index back towards 10800 or higher. Similarly,Sensex (34046.94, -0.40%) could also bounce back towards 35000 in the near term.
COMMODITIES
Brent (64.62) and WTI (61.48) are trading lower. WTI is likely to trade in the 63-59 region in the coming sessions while Brent could move up towards 66 again with a possible downside of 63. Some upmove is possible this week towards 66 and 63 respectively.
Gold (1326.40) is trying to move up again towards 1340 levels while above 1310. Near term looks bullish to sideways.
Copper (3.1280) moved down sharply but has paused above support near 3.07. While the price remains above 3.10, it my move upagain towards 3.20
FOREX
After 2 weeks of Dollar strength, the American President's 'trade wars are good' comment late last week (along with plans of imposing new tariffs on US imports of steel and aluminum) has again weakened the Dollar.
The Dollar Index (89.93), as per our prediction in the morning briefing on 1st March, tested resistance near 91 (by seeing a high of 90.93) and has subsequently dipped from there. There is immediate support for the Dollar Index at current levels – provided by the 13 days and 21 days moving average lines on daily line chart and also by the 5 weeks moving average line on the weekly line chart. On the daily candles, the next support is seen to be near 89.75. If the index breaks these supports, it could signal the beginning of another bearish phase for the Dollar.
The Euro (1.2321), exactly as per our prediction, bounced from support near 1.215 and is now headed back towards levels near 1.25-1.26. However, some resistance could be provided by the 21 days moving average line on the daily line chart near current levels. If it breaches this moving average line, we could expect it to move up towards 1.25 soon.
Dollar-Yen (105.52) broke crucial support near 106.5 on 3 day line charts and is now headed towards support near 104.50-104.75 on the daily candles. On the weekly line chart, we see lower support near 103.75, which could be another crucial long term support level, whose break will confirm medium term bearishness.
The Euro-Yen (130.01) has seen lows near 129.7-129.8 and might now test support on daily candles near 129.5 any time this week or next week. With Euro expected to gain some more strength against the Dollar this week, the test of 129.5 might not happen immediately.
Pound (1.3788) against our expectation of a test of 1.36, seems to be bouncing from support near 1.3775 on the daily candles. If this support continues to hold, we might see Pound move back up towards 1.4 over the coming sessions.
Dollar-Rupee (65.175): Support at 65.00-64.90. Can bounce to 65.40-60-70.
INTEREST RATES
US 10 Year Yield (2.84), US 30 year Yield (3.1234), US 5 year yield (2.596), US 2 year yield (2.22) : US Yields have all dipped further, which might be a result of investors moving away from equity towards debt post Trump's 'trade war' comments. The first half of March might just see muted movement in US yields. As the 21st March Fed meeting comes closer, there could be a rise in yields in anticipation of a rate hike.
(Long term resistance levels for the 4 yields have been as follows: 2.85-2.90, 3.20, 2.7 and 2.2 respectively – a decisive breach of these levels could happen in March 2nd half.)