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BoE Carney talks markets’ initial take on May’s Brexit defeat
BoE Governor Mark Carney told the parliament that after yesterday's vote in the Commons, the risk of a no-deal Brexit has diminished, or the process would be extended.
But Carney emphasized that "I'm not giving my view, I'm giving the markets' initial take". Also he added "I wouldn't put much weight on these very short term-moves. The market is waiting."
Pound Steady After May Defeat, Focus On No-Confidence Vote
Investors were thrown onto an emotional roller coaster ride yesterday evening as Sterling rallied across the board despite Theresa May’s historic Brexit defeat in the House of Commons.
Expectations were initially elevated over the British Pound witnessing downside shocks in the event of May losing by more than 100 votes. However, bulls were clearly in the driver’s seat with the Pound rebounding against the Dollar after the Prime Minister lost by a record margin of 230 votes. A logical explanation behind the appreciation could be based on the fact that the defeat in the Commons was already heavily priced in. With speculation in the air over May’s overwhelming defeat potentially reducing the probability of a no-deal scenario, Sterling is likely to find near-term support, and this was reflected in price action this morning.
It is certainly too early for any celebrations, especially when considering how Theresa May will be facing a vote of no-confidence initiated by Labour this evening. The Pound may find some short-term stability if Prime Minister May is able to survive the no-confidence vote, as this outcome removes some element of uncertainty. A situation where the government loses the vote will be detrimental to the Pound because it increases the likelihoodofan early general election.
The truth of the matter is that uncertainty remains a major theme with the outcome of the no-confidence vote open to question. With the chance of extending Article 50 increasing by the day, growing speculation around Theresa May seeking further concessions from the EU and expectations floating around about a second referendum – Pound volatility is inthe cards.
Away from Brexit and politics, the UK inflation report is scheduled to be released this morning with inflation expected to decline 2.1% in December. The market reaction to the inflation report is likely to be muted as investors focus on Brexit.
In regards to the technical picture, the GBPUSD’s trajectory will be heavily dictated by how the no-confidence vote against Theresa May plays out. A technical breakout above 1.2920 is likely to encourage a move higher towards the psychological 1.3000 level
Dollar fights back… but for how long?
Across the Atlantic, the Dollar fought back against a basket of major currencies with prices trading around 96.00 as of writing.
The upside potential feels limited, especially when considering how the fundamental themesweighing on the currency remain present. Mixed domestic economic data, dovish comments from Fed officials and growing speculation over the central bank taking a pause in monetary policy tightening this year will continue weighing on the Dollar. Investor appetite towards the Greenback is seen diminishing even further if soft economic data questions its safe-haven status. Sellers still have an opportunity to reclaim control if 96.00 proves to be a stubborn resistance level.
Gold searches for spark
It is becoming increasingly clear that Gold is waiting for a fresh catalyst to make its next major move. The yellow metal continues to trade within a range with resistance around $1,296 and support at $1,280. A breakout above $1,296 will open the gates towards the psychological $1,300 level and beyond. On the other hand, weakness below $1,280 is seen triggering a decline back towards $1,272.
UK Leadsom said May will survive confidence vote, then seek Brexit consensus
Andrea Leadsom, leader of the UK Conservative Party in the Commons, expressed her confidence that Prime Minister Theresa May will survive the confidence vote today.
She added that, "the prime minister will then not necessarily be looking for brand new ideas that no one has thought of before, but actually seeking a consensus, actually a fresh initiative to find a solution that is negotiable with the European Union and that would command a majority in the House of Commons,"
On what's next, she emphasized "what we need to do is to find a way that (May's) deal or some part of it or an alternative deal that is negotiable can then be put to the European Union so that we will get this Brexit through by March 29."
Separately, United Kingdom Independence Party leader Nigel Farage predicted that in case of the second referendum, "leave" vote will even be bigger. He said "The British may be a very placid people, very laid back but I promise you: if they get pushed too far it's a lion that will roar. We will be even more defiant if we have to fight a second referendum and we will win it by a bigger majority."
EUR/USD Outlook: Mixed Near-Term Outlook While The Price Holds Between 55 And 10SMA’s
The Euro consolidates after strong fall on Tuesday which generated negative signals on close below daily cloud top / 20SMA (1.1433/20) but failed to clearly break below significant Fibo support at 1.1392 (50% retracement of 1.1215/1.1569 rally).
Indicators on daily chart also show mixed signals as momentum is rising but slow stochastic is heading south and MA's are in mixed setup.
Fresh bears off 1.1569 high (10 Jan) need boost on break below 1.1392 pivot and 55SMA (1.1380) that would signal further weakness towards 1.1350 (Fibo 61.8%) and 1.1309 (3 Jan trough).
On the other side, sustained break above 1.1423/51 (20/10SMA's) is needed to sideline existing downside risk and revive bullish bias.
Res: 1.1423, 1.1451, 1.1471, 1.1540
Sup: 1.1392, 1.1380, 1.1350, 1.1309
The Analytical Overview Of The Main Currency Pairs
The EUR/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.14675
Open: 1.14111
% chg. over the last day: -0.56
Day's range: 1.13931 – 1.14113
52 wk range: 1.1214 – 1.2557
Yesterday EUR/USD was in a bearish mood. The quotes descended by more than 100 points. Right now the trading instrument is in the sideways movement. The key levels are 1.13900 and 1.142520. You should open positions from the key levels, but consider that the pair has further descend prospects.
The Economic News Feed for 16.01.2019:
Retail Sales Reprort (US) – 15:30 (GMT+2:00);
Federal Reserve's Beige Book (EU) – 21:00 (GMT+2:00);
The indicators point to the power of the buyers, the price fixed below 50 MA and 200 MA.
The MACD histogram is in the negative zone but above the signal line which gives a weak signal to sell EUR/USD.
The Stochastic Oscillator is in the neutral zone but above the signal line which gives a weak signal to sell EUR/USD.
Trading recommendations
Support levels: 1.13900, 1.13550
Resistance levels: 1.14250, 1.14650, 1.15000
If the price fixes below the local support of 1.13900 expect further descend toward 1.13550-1.13200.
Alternatively the quotes can grow toward 1.14650-1.14800.
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.28560
Open: 1.28833
% chg. over the last day: +0.05
Day's range: 1.28556 – 1.28954
52 wk range: 1.2438 – 1.4378
1.2438 – 1.4378
At 11:15 (GMT+2:00) the UK will publish the consumer price index.
Indicators do not provide precise signals, the price has crossed 50 MA.
The MACD histogram is close to 0.
The Stochastic Oscillator is in the neutral zone, the %K line is below the %D line, which points to a bearish mood.
Trading recommendations
Support levels: 1.28400, 1.28000, 1.27500
Resistance levels: 1.29000, 1.29400
If the price fixes below 1.28400, look for the market entry points to open short positions. The movement will tend toward 1.2800-1.27800.
Alternatively the quotes can grow toward 1.29400-1.29600.
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.32817
Open: 1.32685
% chg. over the last day: -0.20
Day's range: 1.32452 – 1.32545
52 wk range: 1.2248 – 1.3664
The USD/CAD are moving sidewards. The investors are waiting for additional drivers. You should keep an eye on the oil quotes dynamics. The key support and resistance levels are 1.32350 and 1.32700. Positions should be opened from the key levels.
The Economic News Feed for 16.01.2019 is calm.
The price fixed below 50 NA and 200 MA which points toward a bearish mood.
The MACD histogram is close to 0. There are no signals.
The Stochastic Oscillator is close to the oversold zone, the %K line is crossing the %D line. There are no precise signals.
Trading recommendations
Support levels: 1.32350, 1.32000
Resistance levels: 1.32700, 1.33100, 1.33600
If the price fixes above 1.32700 you should consider buying USD/CAD. The movement will tend toward 1.33100-1.33300.
Alternatively the quotes can fall toward 1.32000-1.31700.
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 108.154
Open: 108.653
% chg. over the last day: +0.45
Day's range: 108.546 – 108.641
52 wk range: 104.56 – 114.56
Yesterday the USD/JPY was in a bullish mood. The quotes grew by more than 60 points. This mood remains. The key levels are 108.4501 and 108.700. You should open positions from them and consider that the quotes have prospects for further growth.
The Economic News Feed for 16.01.2019 is calm.
The indicators do not provide precise signals, 50 MA has crossed 200 MA.
The MACD histogram is in the positve zone but below the signal line, which gives a weak signal to buy USD/JPY.
The Stochastic Oscillator is in the neutral zone, the %K line is above the %D line which points to a bullish mood.
Trading recommendations
Support levels: 108.450, 108.150, 107.800
Resistance levels: 108.700, 109.000, 109.300
If the price fixes above 108.700 expect the quotes to grow toward 109.000-109.200.
Alternatively the quotes can fall toward 108.150-108.000.
British Parliament Rejected The Brexit Deal
Yesterday, the US dollar strengthened against a basket of major currencies despite weak economic statistics. Thus, the NY Empire State manufacturing index counted to 3.90 in January, while experts expected 10.75. The producer price index fell by 0.2% instead of 0.1%. However, the dollar index (#DX) closed yesterday in the positive zone (+0.38%).
Yesterday, the Brexit vote took place in the British Parliament, as result members of Parliament rejected the Brexit deal proposed by Theresa May. Such a situation may lead to the UK exit without a deal, or a second referendum will be held. Prime Minister Theresa May has only three days to submit the Brexit backup plan.
The "black gold" prices are rising. At the moment, futures for the WTI crude oil are testing the mark of $52.15 per barrel. At 17:30 (GMT+2:00), a report on crude oil inventories will be published in the US.
Market Indicators
- Yesterday, the bullish sentiment was observed in the US stock market: #SPY (+1.15%), #DIA (+0.71%), #QQQ (+1.95%).
- The 10-year US government bonds yield is at the level of 2.72-2.73%.
The news feed on 16.01.2019:
- Consumer price index in the UK at 11:15 (GMT+2:00);
- Retail sales in the US at 15:30 (GMT+2:00);
- Fed's "Beige Book" at 21:00 (GMT+2:00).
USD/JPY Under Pressure
Pivot (invalidation): 108.75
Our preference Short positions below 108.75 with targets at 108.30 & 108.10 in extension.
Alternative scenario Above 108.75 look for further upside with 109.00 & 109.45 as targets.
Comment As Long as the resistance at 108.75 is not surpassed, the risk of the break below 108.30 remains high.
GBP/USD Rebound Expected
Pivot (invalidation): 1.2820
Our preference Long positions above 1.2820 with targets at 1.2890 & 1.2930 in extension.
Alternative scenario Below 1.2820 look for further downside with 1.2770 & 1.2730 as targets.
Comment A support base at 1.2820 has formed and has allowed for a temporary stabilisation.
EUR/USD The Downside Prevails
Pivot (invalidation): 1.1430
Our preference Short positions below 1.1430 with targets at 1.1380 & 1.1345 in extension.
Alternative scenario Above 1.1430 look for further upside with 1.1460 & 1.1490 as targets.
Comment A break below 1.1380 would trigger a drop towards 1.1345.
USD/TRY Rebound Expected
Pivot (invalidation): 5.4290
Our preference Long positions above 5.4290 with targets at 5.4670 & 5.4870 in extension.
Alternative scenario Below 5.4290 look for further downside with 5.4100 & 5.3960 as targets.
Comment The RSI shows upside momentum.
