Daily Commentary | 10/09/2019
GBP rises yet uncertainty remains
GBP strengthened yesterday as risks surrounding a hard Brexit seem to be fading away yet corrected lower later on. The Queen approved the no no-deal Brexit law yesterday practically strengthening the chances of a soft Brexit. On the flip side, UK’s PM Boris Johnson seems to plan to strike a deal with the EU about Brexit yet at the same time stated that he would not ask for another delay of Brexit. At the same time, it should be noted that the UK Parliament has again rejected Boris Johnson’s bid for a snap election, leaving him with little choice. It should be noted that uncertainty seems to have strengthened somewhat as the speaker of the UK Parliament a man characterized as opposing No Deal, announced that he will resign. Analysts tend to note that the threat of a no deal scenario seems to have somewhat receded yet has not gone away completely. Also, the pound got some support yesterday as the UK GDP and manufacturing output growth rates, both for July, outperformed expectations. We could see volatility for the pound continue, yet pound traders may also be eyeing today’s release of UK’s employment data for July.
Cable rose yesterday during the European session and despite correcting lower later on, remained above the 1.2310 (S1) resistance line, now turned to support. Should UK’s employment data for July disappoint the market, we could see the pound weakening today and the pair dropping somewhat, yet on the flip side, Brexit optimism seems to be characterising traders’ sentiment. Should the bulls be in control over cable’s direction, we could see it breaking the 1.2400 (R1) resistance line and aim for the 1.2510 (R2) resistance hurdle. Should the bears take over we could see the pair breaking the 1.2310 (S1) support line and aim for the 1.2210 (S2) support barrier.
JPY retreats as uncertainty weakens
JPY weakened yesterday and during today’s session, as risks surrounding global politics and economics seem to be on the retreat. The possibility of a hard Brexit fading, rumors of German stimulus plans to revive the country’s economy and progress made in the US-Sino relationship, boosted investor’s hopes and confidence. Hopes for a breakthrough in the US-Sino relationships rose as the US Treasury Secretary Mnuchin stated that there was a “lot of progress” and that the US side was “prepared to negotiate”. It should be noted that the lack of negative headlines despite no actual progress being made yet also may have boosted confidence. Should uncertainties continue to be on the retreat, we could see JPY weakening further.
USD/JPY on Monday broke the 107.20 (S1) resistance line (now turned to support in a continuous upward movement, until its stabilization late in the Asian session today. Should market uncertainties continue to thaw, we could see the pair rising once again today, however our main scenario is for the pair to have a sideways movement today as the upward movement was broken. Should the pair come under the selling interest of the market, we could see it breaking the 107.20 (S1) support line and aim for the 106.60 (S2) support level. On the other hand should the pair’s long positions be favored by the market, we could see it braking the 107.75 (R1) resistance line and aim for the 108.35 (R2) resistance level.
Other economic highlights today and early tomorrow
In today’s European session, we get Norway’s CPI rate for August, UK’s employment data for July and in the American session Canada’s number of house starts for August and from the US the API weekly crude oil inventories figure. In tomorrow’s Asian session, we get Australia’s consumer sentiment for September.
Support: 107.20 (S1), 106.60 (S2), 106.00 (S3)
Resistance: 107.75 (R1), 108.35 (R2), 108.90 (R3)
Support: 1.2310 (S1), 1.2210 (S2), 1.2135 (S3)
Resistance: 1.2400 (R1), 1.2510 (R2), 1.2590 (R3)