The pound rallied for some time yesterday, as a Bloomberg article stated that the UK government would be preparing a Brexit compromise that could possibly break the Irish border deadlock. According to the article, the plan may include the notion of the whole of the UK to remain under the EU’s customs regime until the Irish border issue is resolved and could be submitted until the end of the month. It could prove to be a longshot for the UK to pass such ideas in the negotiations with the EU, however things may be even more complicated given that the Conservative party relies on Northern Ireland’s DUP for a majority in parliament. Should there be further headlines on Brexit we could see volatility for the GBP rising.

Cable rose yesterday breaking the 1.3080 (R1) resistance line, however corrected later on and continued to test the 1.3030 (S1) support line. The pair seems to be stabilising for now, however today’s financial releases could weaken the GBP. Should the pair come under selling interest, we could see the pair breaking the 1.3030 (S1) and aim for the 1.2965 (S2) support barrier. Should on the other hand the market favor the pair’s long positions we could see it breaking the 1.3080 (R1) resistance line and move higher.

RBA remains on hold, AUD supported at current levels

As was widely expected, RBA kept interests rates unchanged at +1.50% and the AUD/USD remained supported at current levels. The accompanying statement stated that household consumption remains a source of uncertainty and wage growth remains low and likely to continue so for a while. On the bright side it mentions that low rates are supporting the economy, the GDP growth rate is expected to average a bit above 3% in 2018/19 and the outlook for the labour market remains positive. We see the case for the statement to have a rather neutral tone and support AUD at current levels.

AUD/USD continued its sideways movement yesterday and during the release of RBA’s interest rate decision it aimed for the 0.7240 (R1) resistance level. We maintain our opinion of a sideways movement, however bearish tendencies could occur as the USD side could strengthen. Should the bears take over the pair’s direction we could see the pair, breaking the 0.7200 (S1) support line and aim for the 0.7160 (S2) support barrier.

In today’s other economic highlights:

In the European session we get UK’s construction PMI for September, while late in the American session we get from the US the API weekly crude oil inventories figure. As for speakers, FOMC member Quarles and Fed Chairman Jerome Powell speak. Also please be advised that the EU finance ministers are to have a meeting today and there could be some comments regarding the Italian deficit on the side-lines, which could affect the EUR. In the commodity markets, oil prices rallied again yesterday as fears grew of a possible supply shortage. The fears grew as the US sanctions against Iran’s oil industry are set to kick in by the 4th of November. Analysts point out that there may not be enough spare production in the short term to meet demand. Should there be further headlines of a lack of spare production we could see oil prices rising even further. Should you be interested in fundamental news about gold, please refer to our weekly outlook later today.

GBP/USD 4H

Support: 1.3030 (S1), 1.2965 (S2), 1.2910 (S3)

Resistance: 1.3080 (R1), 1.3150 (R2), 1.3215 (R3)

AUD/USD 4H

Support: 0.7200 (S1), 0.7160 (S2), 0.7115 (S3)

Resistance: 0.7240 (R1), 0.7280 (R2), 0.7315 (R3)